That is what is commonly known as a blind pipe, and is a restriction to decrease power. When the 2-stroke engine have both intake and exhaust at the same time, the engine is being "short circuted", and unburnt fuel are thrown directly out in the exhaust pipe. The initial pressure wave from the exhaust will hit the zig-zag inside the silencer, the catalysator, the bend or the narrow end of the expansion chamber (depending on the style of our exhaust) and will throw a pressure wave back towards the engine, which presses some of the unburned fuel back into the engine.
As you can imagine, an exhaust for a 2-stroke must be calibrated in size, length, bends and backpressure to the size of the engine and to the rpm, where the most tourque is wanted. :p
The initial exhaust that goes into the blind pipe then creates a pressure wave that comes at a bad time, and ruins the other pressure wave, so the unburnt fuel is not thrown back into the pipe.
Visual of this theory:
As you can imagine, this is very bad for the enviroment (given that you do not increase rpm after removing this pipe) and it also reduces torque dramatically. Cut it off, weld a plate over the hole and weld the thing back on, so the police wont notice that it's missing.
This is also why you need another exhaust, when you change cylinder.
