Basically it's just what the name says. When water's flowing that's effectively almost the same thing - the flow restriction causes a drop in pressure and vice-versa. The pressure regulator has a mechanism that will adjust the flow restriction to maintain the right output pressure, all the way to cutting it off entirely. So, with 100PSI input the restrictor might knock it down to 40-50PSI when it's flowing, but once the faucet's off it'll start creeping back up to 100 and stay there.
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