No, “Category mirrors a mailing list” doesn’t have anything to do with digests.
Essentially it allows you to subscribe to a mailing list and have every email that is sent to that mailing list also appear in that category. In order for this to work you’d normally need to change a bunch of email related site settings. “Category mirrors a mailing list” applies those changes only to the category.
See Creating a read-only mailing list mirror for more information.