Graham,
If you are plugged into the monitor system, you can have other instruments added to your mix, or excluded. As for in the room, they don't completely isolate sound...it's closer to "ahh, I can hear me on the microphone...and it's right in my ears...ahh"
Because they're in your ears, you're not running the hi SPLs, and db associated with stage volume. Even when you are plugged into the board, your receiver has an attenuation, and a limiter/really hi gain warning device. Some allow you to set the threshold of the limiter, independent of your volume.