Windows currently doesn't have a 260 character path length limit. However some legacy Win32 APIs only support up to 260 characters for backwards compatibility and old file system reasons.
If you use UNC paths you can have a path with 32,767 characters in it, 255 characters per element (e.g. a single folder/file name of 255 characters).
To quote MSDN:
> The Windows API has many functions that also have Unicode versions to permit an extended-length path for a maximum total path length of 32,767 characters. This type of path is composed of components separated by backslashes, each up to the value returned in the lpMaximumComponentLength parameter of the GetVolumeInformation function (this value is commonly 255 characters). To specify an extended-length path, use the "\\?\" prefix. For example, "\\?\D:\very long path".
All this GPO policy does it change existing non-unicode Win32 APIs to support paths beyond the 260 character limit. However this likely won't work on pre-Windows 10 versions of Windows, non-NTFS filesystems, and just having long file/folder names may within itself break older software.