The computer can be doing anything, it will continue to function as normal--if you left a download running in the background, it wont be interrupted, etc etc...
I don't know why there isn't an option to turn that off (these days), but, once upon a time when CRT monitors were prevalent, that technique would save your monitor from burn-in or etching from the electrons being fired at the same spot (by a stationary image) for a prolonged period of time. These days, with LCD and LED monitors making the majority and CRTs going extinct, there isn't any need at all for any kind of screensaver or auto-shut-off for the monitor (LCDs don't suffer from burn-in). So, in answer to your last question, no, it isn't a bug.
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