CPU completely halts, so you can't use the joypad or sound anymore.
https://gbdev.gg8.se/wiki/articles/Gameboy_and_Gameboy_Color...
In PGB mode 2 the CPU is still able to run (within a limited address range) and can use register FF75 "PGBIO" for limited input and output on some cartridge pins (and/or the link port for IO).