The preamp in the guitar is always in use. But this is to the players benefit, as it maintains the pure tone of the pickups, but doesn't allow for things like cable capacitance or other "outside" influences to affect your tone (like low input impedance to pedals in your signal chain)! The tonality of of the pickups remain as intended/designed when volume is lowered (no loss of highs), or if cable length (capacitance) is increased, etc... In addition, the boost is simply a transparent gain increase of up to 22 dB. Which, when used with a "clean" tone, will increase volume as well as add a little crunch. When used with a dirty channel, will drive the amp's input and thus increase the sustain and distortion.
Other things to note: There is no "EQ" in the magnetic circuit and the tone knob on the guitar still affects the pickups in the traditional sense.