It reduces the chance of pregnancy, but in a highly efficient way.
The reason I say it "reduces" the chance of pregnancy is because this, as with all contraceptives, is not 100%% effective.
Pregnancy depends on the presence and concentration of certain hormones in the body. The morning after pill essentially adjusts these hormones quickly to block or disrupt the ovulation cycle before the recently deposited sperm can become active in the uterus, that or it makes the uterine wall uninhabitable for a freshly fertilized egg, forcing it to pass with menstruation. Yeah it only reduces the chance, but the chance is reduced to 1 or 2 percent.
From what I've read it kills the fertilised egg if there is one. As in if you had unprotected sex and weren't sure whether you fell pregnant or not, the morning after pill kills any chance of pregnancy. It shouldn't be used as a contraception though, it should only be taken in an emergency.
You use the morning after pill when your first method of birth control fails (like if the condom breaks). The sooner you take it, the better chance you'll have of preventing pregnancy.
The sooner you take it, the better. but if you are already pregnant, it doesnt terminate that pregnancy. so it only reduces the chance.