Does Dolby Atmos affect Apple Music's audio quality?

Audio Quality for Downloads - Lossless, Download with Dolby Atmos - ON.

If I play a song (which has an Atmos version) it will be in Dolby Atmos but if I turn off Dolby Atmos from Automatic or Always On in Settings to listen to the stereo version it will not display lossless. At what quality does it then play? And why isn't in playing in the lossless?

[Re-Titled by Moderator]