It forces hardware acceleration, I believe. All you need to do to enable hardware acceleration in apps is to add one line of code to your program, so I guess checking this forces older apps to be hardware accelerated.
I haven't really noticed many differences except...
1. Spotify transitions are MUCH smoother (swiping the album cover to go to the next song)
2. Fruit ninja is screwy and freezes with the option on
Apparently LauncherPro doesn't work well with it, either...