It just means it will display as per the PCs output. If you display a 800x600 signal, it will show it with a black border. Underscan/overscan will be controlled by the PCs display card.
For example, my Philips LCD when connected to an ATI output in PC mode, displays a small black border around the picture in native resolution. This is because ATI underscans by default, assuming (incorrectly) that HDTVs will overscan. This has to be manually corrected - 1:1 does not eliminate the need for changing the scan settings at all times. It is not required with nVidia output though...