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If the "Use sender's email address" box is unchecked, e-mail is sent using the sending user's private e-mail address (or in our case, it's not sent and the user gets an error because we don't allow e-mail relaying). If the box is checked, then the site's default e-mail is used to send the message.
This is backwards from the description/help.
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Comment #1
ivnish CreditAttribution: ivnish commented