The 'demo mode' option in the Site Manager allows a child site to be made available in a 'safe' demo mode.
The main reason for enabling demo mode is to prevent abuse by triallers of the site.
Emails generated through the demo site are emailed to the Site Owner (ie the trialler) rather than to the normal recipients. This prevents them using the server to send unsolicited email (spam). The normal recipients (the addresses the emails would have been sent to had the site not been in demo mode) are noted in the email headers (X-To, X-CC, X-BCC).