The connection will still be SSL encrypted. You just won't be doing it on a link that uses validated-as-correct certificates. Anyone can create themselves an SSL certificate which will do perfectly acceptable encryption at whatever level your browser and the webserver support.
However, what you will get is many complaints about not being able to verify the certificate's authenticity. This is to prevent Joe M. Alicious from creating themselves a certificate claiming to be "microsoft.com" and setting up their own Windows Update host. The cert will say it's microsoft.com, but it cannot be authenticated as actually being microsoft.com, as Verisign (or whoever) did not actually issue that cert and put their own stamp of authenticity (signing the cert) on it.
_VERIFYHOST is there to check that the hostname of the URL you're connecting to (e.g. "microsoft.com") is listed within the SSL cert. With this option set to false, url/cert hostname mismatches will be ignored (say, you've got a development box at testbox.develhost.com, but are using your client's real valid 'example.com' cert).
_VERIFYPEER disables validating the entire certificate. This allows self-signed certs to work. Otherwise the SSL library will barf saying that the cert's issuer isn't valid.
But regardless of either setting, if you force through a connection, it WILL be ssl encrypted.
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