I found this concept quite hard to grasp but this diagram helps.
Quoted from "abovethebeast.com"
We're dealing with the geometric relationship of three points, two of which don't ever move in relation to one another, and one that moves constantly in relation to only one of the other two. The chain rides around a path that encircles all three of these points. You have the counter-shaft sprocket (point A) mounted to the engine, which is mounted to the frame. You have the swingarm pivot (point B) which is also mounted to the frame. Then you have the rear axle (point C), and as a result, the rear sprocket, which is not mounted to the frame.
The two points that are mounted to the frame, points A and B, never move in relation to one another. They are always the exact same distance apart, no matter what anything else on the motorcycles does. Because these two points are static, we can draw a line through their centers and call it the A-B Line that we'll use in minute. Point C rotates around point B. The chain is lashed around points A and C. Starting to sense where things might get funny for the chain?
As C moves in its arc around B, the distance from C to A changes. When C is aligned with the A-B line, such that all three points are perfectly aligned in a straight line, the distance from A to C is at its max. The further out of alignment with A and B that C becomes, the less the distance from A to C.
Now to apply that bit of sorcery to the chain tension adjustment on your motorcycle. You adjust the chain while the suspension is fully, or near fully extended. In other words, when C well out of alignment with the A-B line, in this case, C is below the A-B line. But this is not the point where the chain will be at its tightest as C rotates. It would be a pain in the ass to have to compress the suspension so that C in on the A-B line, and adjust the chain to just the couple millimeters of chain slack that it needs at it's tightest point. Rather, we adjust the chain with an amount of slack that will cause it to have only 2 - 5 mm of play when C passes through the A-B line; at its tightest point. This amount of slack when the suspension is unloaded might be 10 mm, 1/2 inch, two fingers between the chain and swingarm, whatever, that's not what's important in this article.
The critical part here is that there HAS to be enough slack in the chain at the top and bottom of the suspension travel, that when C passes through the A-B line, it does not get too tight and start pulling on things like the transmission shaft that is point A, or overloading the wheel bearings at point C. There are other, more subtle things that happen to the bearings at point B and to the chain when the tension is too high, but we'll skip that today. The other important point I want to make, is that none of this is effected by the load you are carrying on your bike. All this stuff behaves the same no matter what.