What it does
Sage Mode is an empowered state that can be entered by blending natural energy with one's chakra, creating senjutsu chakra. Sage Mode allows users to tap into the natural force of the world, opening up new techniques to them and allowing them to power up existing ones with the new senjutsu chakra.
Description
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The manifestation of animal-like traits is a reference to the Japanese folktale Jiraiya Goketsu Monogatari, where Jiraiya, Tsunade, and Orochimaru came to study specific animal magic into their ninjutsu use.
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The sage training method used by the Toads of Mt. Myōboku resembles the practices of Shugendō, a highly syncretic religion that originated in Heian Japan in which enlightenment is equated with attaining oneness with the kami. This perception of experiential "awakening" is obtained through the understanding of the relationship between humanity and nature, centred on an ascetic, mountain-dwelling practice. In some Japanese myths, supernatural creatures often appeared as Yamabushi (mountain hermits) of Shugendō, which the Toad Sages of Mt. Myōboku and White Sage Snake bear some resemblance.
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In the anime, the term "Honoured Sage Mode" was only used by Jiraiya. This was corrected to "Sage Mode" in later uses, presumably to create a distinction between Jiraiya's use of the technique.
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Despite granting the user the ability to sense chakra, Jiraiya, Shima, and Fukasaku seemingly didn't display this ability during their fight against the Six Paths of Pain.
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In Naruto the Movie: Blood Prison, the red coat Naruto wore during Pain's Assault appears when he enters Sage Mode and disappears when he turns back to normal.
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In the anime, before life on Earth had chakra with which to infuse it, the use of natural energy was called 'Sage Power' (仙力, senriki).
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In the anime, the snakes of Ryūchi Cave note that Boruto Uzumaki has the potential for senjutsu, having passed trials that proved his strength of body and could handle natural energy.