Legendary in Sneak doesn't do anything on it's own. Now the Legendary Sneak skill feat does impact (but I point this out for anyone who might not realize this feat is poorly named because it reuses other rule words).
Without Legendary Sneak feat, reactive distraction allows you produce a duplicate "illusion" of yourself that you trade places with and allows you to Sneak (including move at half speed). If you don't move into cover, you will stop being unnoticed or hidden. Reactive Distraction is kind of weird because technically if you don't end with concealment or greater cover then perfect distraction doesn't actually work...but then the whole thing doesn't make any sense about how it should be resolved. I would probably run it as you become observed and the duplicate is still there and takes the attack.
However, with Legendary Sneak feat you can just remain hidden because you don't need an object to hide behind to sneak.