Changes

No, it means you'll get twice as many magical and better items dropping as you would normally. If a monster had a 1% chance to drop a magical item, it would now have a 2% chance.

Oh yes. It doesn't increase the number of items they drop, and their drops are already magical or better, so the +MF increases the odds that they'll drop better than magical stuff. Rather than normally getting 5 or 6 magical items from an Act Boss, with good MF you'll expect a couple of Rares, and maybe a Set or Unique as well.