Ignore Conversation is a new feature of Exchange 2010, available for Outlook 2010 and OWA. It can be really helpful with derailed conversations.

Contrary to popular belief, it is not a rule, but it is a conversation action.

There are three kinds of conversation actions namely Ignore, Move to folder and Categorize.

A conversation action is applied to all email objects of a certain PidTagConversationId.

Applying the Ignore conversation action causes all related email to be moved to the deleted items folder.

We can make this visible using the infamous MFCMAPI tool.

Choosing the “Open Associated Contents Table” option on the “Conversation Action Settings” folder shows all the items with a conversation action applied.

You can also choose to stop ignoring a conversation by selecting the conversation in the deleted items folder and deselect the Ignore option.

So that's how the Ignore Conversation options works. It also great to dive in the MSDN links mentioned if you want to know more about the inner workings of Exchange.