Does shrinking a SQL Server transaction log remove transactions from the log? I know shrinking the log is counter-indicated and has been covered many times, but I just encountered the following, baffling scenario:

We had a run-away query attempt to delete so many records that the transaction log file grew to 30GB on a Windows Server 2008-R2 machine running SQL Server 2008 with the database set to FULL recovery mode. My boss ran a script to backup the database once and then shrink the transaction log to the point where transaction log file was just 1024K. He says the size of the transaction log did not shrink by executing the backup and had the shrink run in a loop to decrease the unused space. How can it reduce the size of the file 30,000 times by just cleaning up unused space? Are we losing useful data by shrinking the log?
"Shrinking" the log is actually "clearing" the log.

The log is basically a list of operations that have been performed, and is used as a reference for rollbacks, restores, checkpoints, etc.

The space wasn't "unused" but it contained transactions that had been committed and were reflected in the backup that was performed.

Your boss cleared out all the transactions in the log file, but since you had just run a backup this is acceptable since none of those transactions were uncommitted.