A microphone outputs a "balanced" signal, which is also "mono" (1 audio channel). If you need to connect a mic to a 3.5mm "stereo" input, such as on an iPod, PC sound card or HD DSLR or video camera, a cable like this is required to split the mono signal into a stereo signal, so it reaches both the left and right channels of the 3.5mm stereo input.
Perfect for Balanced Mic to HD Video Camera Connection - Compact HD Video Cameras and HD DSLR Cameras often have a 3.5mm stereo mic input. If you need to connect a balanced microphone signal from, for example, Rode NTG-series shotgun mics to one of these cameras, a mono-to-stereo cable is handy so the audio is recorded to the LEFT and RIGHT audio channels.
What happens to the balanced signal? - As you are connecting to a stereo 3.5mm input, then you cannot gain a balanced connection. The balanced (inverted polarity signal) just gets shorted with the ground and not used.
What about noise? – Balanced lines are great for rejecting RF noise and interference over long lengths of cable. As this is only a short patch cable, converting from a balanced output to an unbalanced input should not present problems with respect to noise and interference from external sources.