That used to confuse me too... the Effects menu seemed to repeat things that could be found elsewhere in Illustrator, so what was the point?
Turns out that if you use Effects, the original object is still editable, whereas elsewhere, the original object is lost. So if you do, say, Round Corners under the Filter menu, close the file and open it again, the original object is lost and only the rounded object remains. The same command under Effects, however, just gives the impression that the effect is applied to an object, but it can be removed at any time.
I don't have Illustrator on this computer, unfortunately, so I can't tell you specifically what Effect > Outline Stroke does... I'll check it in work tomorrow.