Can you please explain what affect this has to phone?

Is any configuration data permanently erased by doing this or is my phone returned to out of the box state?

I did this with my Nokia 6600 and it fixed a problem I was having recording voice tags but it may have caused a bluetooth related problem in that I can no longer sync Calendar events in iSync on the mac.

It resets the phone to the original factory settings. The MMC will not be formated/reset.
And so the answer is that it will delete anything stored on the phone.