When loop recording, Pro Tools creates a single file containing all recording passes where each recording pass is a clip in the file. On the track, only the last recording pass is present as a clip in the main playlist. All other clips (recording passes) are hidden, but can be recalled as matching alternate clips (takes).
When enabled, the new Automatically Create New Playlists When Loop Recording option in the Operation Preferences page automatically copies each clip (take) to a new playlist in the track. This facilitates using Playlists view for auditioning and selecting alternate takes.