Why is JavaScript code executed while condition is false? (Eloquent JavaScript - Deep comparison)

Question (Eloquent JS 2nd Ed, Chapter 4, Exercise 4):

Write a function, deepEqual, that takes two values and returns true only if they are the same value or are objects with the same properties whose values are also equal when compared with a recursive call to deepEqual.

Test Cases:

var obj = {here: {is: "an"}, object: 2};
var obj1 = {here: {is: "an"}, object: 2};
console.log(deepEqual(obj,obj1));

Code:

var deepEqual = function (x, y) {
    if ((typeof x == "object" && x != null) && (typeof y == "object" && y != null)) {
        if (Object.keys(x).length != Object.keys(y).length)
          return false;

        for (var prop in x) {
          if (y.hasOwnProperty(prop)){  
            if (! deepEqual(x[prop], y[prop])) //should not enter!!
                return false;
                alert('test');
          }else return false; // What does this section do?
        }
        return true;
    }
    else if (x !== y)
        return false;
    else
        return true;
};

Originaly fulfilled by Paul Roub

Main question: I just added alert to the block of code after if (! deepEqual(x[prop], y[prop])) statement like kind of debugging, and now I have no idea why code inside is still executed while the statement itself is supposed to return true and ! turns it false..?
In addition: What is }else return false; for? (same statement) The function seems to work fine without this section..