The Life Support Module is a multi-faceted device. It is your ship's primary air supply, so you can take off your helmet and breathe inside your ship. It includes CO2 scrubbers, filtration and all the little amenities that make the air inside your ship breathable.
It also includes an emergency reserve system that yes, does feed into your suit in the event that primary life support fails - such as when your canopy shatters and the atmosphere inside the ship vents.
Nothing gamy or special about it. In fact, it's nearly (un)common sense.
Not really, the emergency has to be IN the suit, otherwise it would not work with the powerplant shut down.