This reduces air flow into the engine and thus power. Selecting carb heat will resolve the issue. In any case trouble shooting any reduction in power in a carbureted engine should always start with selecting carb heat full on.
Yes, when selecting 'hot air' in the PA28-140 you also shut off the ram air intake and draw air from within the cowling bypassing the blocked ram air filter. Should you need to maintain hot air then the fuel/air mixture is enriched therefore, for extended periods, consider leaning the mixture to avoid fouling the spark plugs.