When the "deny" statement is used within a route map that is used for policy-based routing, how is the traffic that matches the deny route-map line treated?

Traffic matching a 'deny' statement in a PBR route-map is not discarded; it is merely excluded from policy routing and is then processed by normal routing mechanisms.

In policy-based routing, if a 'deny' statement in a route-map is matched, the router will not apply any policy routing actions defined within that specific route-map line. Instead, the traffic is passed to the next route-map line for evaluation; if no subsequent 'permit' statement matches and applies a 'set' action, or if the end of the route-map is reached, the traffic will be forwarded using the router's standard IP routing table.

While an additional line might be needed for different policy routing, the 'deny' action itself does not require a sequential line to revert to normal forwarding; it's the default behavior if no 'permit' match with 'set' action occurs.

A 'deny' statement explicitly prevents policy routing for the matching traffic by that specific line, thus an additional line for policy routing would only apply if the traffic matched a 'permit' statement.