A "closed loop" refers to a system in which the entire process is done within a "closed" vessel. The solvent used to extract does not ever come in contact with the outside atmosphere. The "loop" portion refers to the recovery and reuse aspect of the system. The solvent will start inside one vessel, and then move through another containing botanical material, after which it will return back into the original vessel hence creating a "loop".
Closed loop extraction is a fast, efficient way to remove essentials oils from botanical material and, when operated properly, is extremely safe.