No, it's only being reduced in volume.
For example, when stats for nerds shows "100% / 44% (content loudness 7.1dB)"
"(content loudness 7.1dB)" means that the loudness of the uploaded video is 7.1dB higher than youtube's target and therefore the player will play it with volume reduced by 7.1 dB.
"100% / 44%" means that the volume slider is at 100% but the player will apply the volume as if it was was at 44%. If you move the volume slider to the middle, stats for nerds will show "50% / 22%", meaning the volume slider is at 50% but the player will apply the volume as if it was at 22%.