Q:

What is the effect of using a # in front of a UNIX command?

My guess from the working of it is that it suppresses the output of the command

A:

It suppresses the command entirely. 
You use it commonly in batch files to either add a comment to your code (explaining to the reader what is going on) or stop a line from running - for example:
# Tell the user the results 
cat $HOME/.temp/results.txt

# This next line doesn't work
# cat $HOME/.temp/next.txt

The equivalent in DOS is to prefix the line with REM. 

