As far as I know, it reduces the downtime after surgery. A lvl 1 surgery downtime might be 5 days. A lvl 2 surgery downtime might be 1 day. No intensive testing done, only an observation.
Assassin that is not true I checked all the operations you can do and the down time was the same for the level 2 Lab. So its not that the description for the upgrade says (upgrade your Laboratory with the latest equipment and tools and unlock new operations) so maybe like some of the kennel stuff the operations aren't put in yet maybe you will be able to change eye color, bring down the toxicity level some, add another beauty operation, or sex change someone maybe stuff like that