Here's my interpretation of what happens. Note if you select and execute the lines by themselves you get different results than you do if you combine them into a batch.

1 CREATE PROC GO @GO int=NULL AS SELECT @GO -- Start a new batch

2 GO-- This GO terminates procedure definition batch

3 GO; -- Begin a new batch

4 GO 3 -- Is this a SQLCMD? Ignored as a batch terminator because of the 3? Start loop.

5 GO -- Terminate the batch

6 EXECUTE('GO 3') -- Begin a new batch

7 GO 3 -- Is this a SQLCMD? Ignored as a batch terminator because of the 3? Start loop.

8 GO -- Terminate the batch

9 DROP PROC GO -- Start a new batch to drop the proc

10 GO -- Terminate the batch dropping the procedure

So we have

Batch 1 lines 1 and 2 -- Define the proc

Batch 2 lines 3 - 5 -- Execute the proc with no parm 3 times

Batch 3 lines 6 - 8 -- Execute the proc with parm 3 times

Batch 4 lines 9 and 10 -- Drop the proc.