Yeah that's the cooler bypass and it's external to the pan and doesn't drop oil pressure, just reroutes flow..
There is a FILTER BYPASS up inside the oil filter mount. Some people plug this but there isn't any need to. It only bypasses the filter in the event it were to be plugged, it doesn't relieve oil pressure, just reroutes flow..
If your filter is NEVER changed for many thousands of miles and eventually plugs up, this will keep you going with dirty oil...
The in-pan bypass (relief valve) was used on LSes with the DOD system or VVT. It DOES relieve oil pressure at about 45psi by dumping into the pan. LSAs don't have this.
read here:
This page has some detail and the plug available: for those that need it.