What does the apache Satisfy directive do?

In most cases this line is not strictly necessary, as Satisfy All is usually the default server setting. If that's the case, the line is not strictly necessary.

The line is added as extra security, "Just In Case" the server was configured to use Satisfy Any setting as its default.
If the server was purposely set using the Satisfy Any setting, you definitely want to override that setting by including the Satisfy All directive to secure files such as .htaccess.

I am not sure if the htaccess file would override the server's default 'Satisfy` directive for all folders at or below some said htaccess file.

For generic code posted on the internet, especially when it's telling you how to properly secure .htaccess files, the poster is being responsible by not making any assumptions about your server settings that could undermine the document's security. Including that "extra" line ensures that the more secure setting is applied to your htacess files. Adding the directive makes the code block work 100% of the time, instead of leaving to chance having htaccess files exposed, for the small set of servers that are configured differently.

As per the apache documentation:

Satisfy Any|All:

Both host-based access restrictions and password-based authentication may be implemented simultaneously. In that case, the Satisfy directive is used to determine how the two sets of restrictions interact.

...used in <Directory>, <Files>, and <Location> sections as well as .htaccess

This directive is only useful if access to a particular area is being restricted by both username/password and client host address. In this case the default behavior (All) is to require that the client passes the address access restriction and enters a valid username and password. With the Any option the client will be granted access if they either pass the host restriction or enter a valid username and password.

Since the default value usually is Satisfy All (the only other option is Satisfy Any), you might not notice a difference when you include that directive. However, your server configuration file (or ?maybe an .htaccess file in a parent directory?? - I'm not sure if this is possible or not) might override the server default. Either way, adding the Satisfy All directive consistently ensures the proper security measure is applied.

By including the Satisfy All directive, you ensure the higher security setting for those files, independent of the setting in your server config.

The linked to doc mentions some use cases of when you might want to instead use Satisfy Any.