The current loop iteration is skipped and the next iteration of that loop is started (i.e. the next 'item' of the list the looper is looping over).
There is no output saved for the loop iteration with the error in the loop itself in order to use the content of the loop in further steps, as if the error didn't happen.
The steps happened inside the loop are shown in the flow debugger and the flow step with the error gets the status
In case the looper is a while loop, which has input from the flow step that failed for the while condition, the looper would fail as well, which is then handled as specified in the looper.