What it does is force you to fully define the sketch before the sketch can be used to create a feature.
I do not recommend using the option. It will create problems, especially if you are using sheetmetal. The edge-flange feature automatically creates an under-defined sketch and will not work with that option on.
We have set a standard that all sketches be fully defined (eventually), but it is up to the users to do so. I have heard that under-defined sketches have a negative affect on assembly performance.
Leaving sketches under-defined can be good for conceptual ideas, but should be temporary.