It allows a small amount of coolant to be circulated by the waterpump, to avoid hotspots and aid in an even warm up befor the thermostat opens (if one is used). That is the bypass hose. The "Other" small outlet on the waterpump is directed into the bottom of the surge tank in FIA type applications.It actually becomes the hose that coolant passes through to fill the system when coolant is added to the surge tank.
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