When ugly permalinks are enabled, query variables can be seen in the URL. For example, in the URL String for testing a sentence in the description - http://example.com/?p=1 the p query var is set to 1, which will display the single post with an ID of 1.
When pretty permalinks are enabled, URLs don't include query variables. Instead, WordPress transforms the URL into query vars via the Rewrite API, which are used to populate the query.

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