Been wondering about this for some time. I have done reading on this and the best evidence I have found that it indeed does lose data comes from Microsoft's website where they state, "Because repairs usually change a disk's file allocation table and sometimes cause a loss of data, chkdsk sends a confirmation message similar to the following:
10 lost allocation units found in 3 chains.
Convert lost chains to files?"
So, if all that is being converted are "lost chains" then aren't those files bad anyway? Is there a better way to recover these "lost chains"? I suppose that may be a better question.
The messages you get when you recover data in that tool is a little misleading. It has to do with NTFS indexing recovery using backup partition tables. You get the convert lost chains message when you have extra information in one partition table that is different than another - for some reason the file was not written correctly to both partition tables. You may or may not have good data going into those files, depending on the reason that it did not make the correct write in the first place. There are many different harddisk recovery methods used by different applications. I know of some professional services that literally use dozens of methods to try to recover bad harddisks and each method has its strengths/weaknesses.