Simulations attempt to replicate activities in 'real life' for various purposes, e.g. training, analysis or prediction. Within projects, simulation can be used not to test an application but also to test the application in conjunction with the business processes and the organization. The contributors don’t play just a role but simulate their own daily activities.
Simulation can be used throughout the implementation process, at the end of each phase, or only at the end of the project. It involves the organization in the change and gathers information on its acceptance in the organization. After the implementation is finished, simulation can be used to test the (yearly) maintenance of IM.
Within the 7 loop model, you can consider a loop as a time period where certain activities are executed. The space between two loops is a period where you can simulate the next loop(s) to get more insight into the consequences of your actions during the previous loop(s).