A closed loop is a pump that draws water directly from the aquarium and pumps it right back into the aquarium. There is no sump or other open container in between. It is for flow/current only although, if there were a need, one of the large canister filters could be plumbed inline using the closed loop. Advantages are 1) You can run a large pump without worrying about having a huge overflow to handle the flow 2) It is basically a sealed system so there is very little chance of a leak 3) It makes for a neater tank...no powerheads hanging around 4) an external type pump is typically used...these are more reliable and quieter than the submersible types 5) it can be combined with an SQWD for wave action 6) it doesn't add a lot of heat to the system.
Disadvantages: none that I can think of
In a 180g reef that I maintain, I have a 1" line with a strainer on it about 4" under the surface of the water. This goes over the back edge of the tank to a 1200gph pump. The return comes back up and over the wall of the tank to a depth of about 6" under the surface where it splits so water is directed in two directions. It works quite well. I have valves on both the intake and returns right above the pump so I can remove the pump with minimal spillage. As long as you don't empty the lines, the pump will restart with nothing more than a small burst of bubbles into the tank. I intend to add an SQWD to it and replumb the returns in the future. HTH