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Rockstar describes it as a pre-pre-game lobby. It is sort of like free mode in the fact that you and your buds can just run around and have fun, but is meant to be a shorter play, which is why you spawn in one location that has a ton of goodies and vehicles. That way you don't have to hunt down the fun stuff because you aren't meant to be in party mode long. Once you and your friends are collected in party mode it is easy to join or create another, more customized game.
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