As near as I can tell, checking this will make your DVD-RWs more compatible with older DVD players. Heres a technical explanation: http://www.pioneer.co.jp/crdl/tech/dvd/6-e.html I read it and sort of get it. I need the plain and simple version too.
I believe it's only for DVD+R media which sets the type to "DVD-ROM" just like dvds you buy. DVD-R already has that type set. Usually for older (say 2 or 3 years old) standalone dvd players you might get it to read a dvd+r by doing this.