For the loop icon next to Play button will loop the animation for testing in GWD's stage live preview. So when you hit Play button, the animation should play on the stage and it should loop infinitely. However, this will not affect a published animation. Currently we support looping animation per layer in Advanced animation mode in GWD. When you have a layer and insert keyframes, you can just click the loop icon in the layer next to Eye icon. This will pop-up the animation looping window where you can set iteration of the animation for the layer. This will affect the published file.
Thanks,
Mariko (Google Web Designer team)