What is the effect of "power saving mode"? Android OS from ICS and above has a "power saver mode" by default (I own a samsung)
What does this mode actually do?

If it reduces clock speed of cpu, then by how much?

How does it attain this power saving? By limiting cpu? Gpu?
I think this is a manufacturer specific feature, not an Android feature.

My Nexus 4 running 4.4 has no power saver mode.

My HTC One running 4.4 does have a power saver mode and although I can choose what aspects of the phone I want to limit to conserve power, I am not told how / what they do to save the power. I guess this will be chosen and set per manufacturer but for example, on my HTC device in power saver mode the options are;

CPU Power
Conserve CPU usage

Display
Reduce screen brightness

Vibration
Turn off vibration feedback

Data connection
Put to sleep when screen is off

Have you had a look in your settings menu? It may well tell you in there what is being limited.