The ECU generates fuel injection signals of a particular pulse width to control fuel quantity, and thereby controls the intake mixture. It does that by monitoring a bunch of different sensors at all times. The ECU operates in two modes: Open loop mode or closed loop. In the default open loop mode the ECU pays no attention to the O2 sensor, therefore the injection time is dependent only on the base map program and all of the other sensors.
Under limited circumstances the ECU will switch to "closed loop" mode. Those are when the bike is either idling or under steady throttle (cruising), and after the O2 sensor has warmed up enough to output a signal of the "proper voltage" range.
During closed loop mode the ECU will trim the injection duration based on the O2 sensor's feedback to achieve the target A/F ratio that creates the desired O2 level in the exhaust stream. Before the O2 sensor has warmed up, or if it has been unplugged, the ECU just never goes into closed loop mode, so it relies on the base map program and all of the other sensors.
The Power Commander simply adds or subtracts time to the fuel injector signal pulse width from the ECU, based only on it's own input parameters., to add or subtract fuel to the mixture Those input parameters are just the engine rpm and the throttle position. If the O2 sensor were still connected and the ECU went into closed loop mode, any time added by the PC would be subtracted back out by the ECU as it attempts to achieve the optimum O2 signal feedback.
In other words, the ECU and PC would be fighting each other, or canceling each other out and you would have no benefit from the PC when the ECU is in closed loop mode. The way to prevent that from happening is to disconnect the O2 sensor.
Nobody really cares much about the mixture at idle (except the EPA), but one reason to run a PC is to eliminate the "lean surge" condition during steady throttle cruising. If the O2 sensor is plugged in the PC will not be able to eliminate that. It will still work at all other times, because the ECU is in open loop mode, but won't rectify lean cruise surging.