Layer 2 Isolation prevents communication between wired and wireless clients in the network.
This enables every wireless or wired subscriber to be not able to communicate to each other even they are within the same subnet. Nobody allows his/her data to be shared with anyone else.
A good solution for hotspot security.
Check out EnGenius Forum with similar topic: http://community.engeniustech.com/topic/934-what-is-layer-2-isolation-does-it-block-the-communication-from-wireless-clients-to-wired-clientsdevices/