Two different things, often confused.

A retention policy is a general rule an organisation sets for how long mail should be kept or when it should be deleted, applied broadly (e.g. "keep everything for 7 years"). A litigation hold (or in-place hold) is a specific, often legally-mandated preservation requirement placed on individual mailboxes — typically triggered by actual or anticipated litigation, an investigation, or a regulatory requirement — and it can override what a user or even an admin tries to delete.

A user can still delete items from their own view of the mailbox, but Exchange Online's hold mechanism preserves a copy in the Recoverable Items folder's Purges subfolder for the duration of the hold — including indefinitely, if the hold has no end date. The item disappears from the user's mailbox but isn't actually gone.

It shouldn't, provided the cleanup tool works within Exchange Online's built-in hold mechanism rather than trying to bypass it — deletions still route through the same Purges-subfolder preservation regardless of whether they were done one email at a time or as part of a bulk cleanup action. Always confirm this explicitly with whatever tool is doing the bulk action before running it against mailboxes you know are on hold.

Litigation hold status is visible per-mailbox in the Microsoft 365 admin centre (or via PowerShell for a full tenant audit) — worth checking before any bulk action across an unfamiliar set of mailboxes, since a hold placed for a legal or regulatory reason isn't always obvious from the mailbox owner's day-to-day usage.