Sneak and you take 60 % less damage for 3 seconds. In exchange, you are completely immobile.
The reduction applies to everything: sword, arrow, fire, fall. A rock that only resisted swords would make no sense.
Releasing the sneak ends the stance immediately. Any ability that takes control away must be returnable by the player who took it. The cooldown still starts: interrupting does not refund it.
In a 1v1 it is a tool; in the middle of a melee it is offering your position to everyone for three seconds. The same button does both, and it is up to the player to know when it is the right one.