If enabled together with Only allow match if all songs in grouping match to one album then all the songs in the folder must match to same album and all songs on the album must be matched, so if there are 10 songs in folder it can only match a 10 song album. If your music collection is already well organized and you have complete albums this ensures that only very high quality matches will be made to MusicBrainz and Discogs but it does also mean if you have any partial albums they will not be matched to a MusicBrainz or Discogs album, although Match to MusicBrainz song only is still enabled to help identify songs.
If you have only this option enabled it means that any album that is matched must be completely matched but this doesn't have to be on a folder by folder basis, so for example if you have a folder containing 10 songs that failed to match any album but existing metadata in the songs creates two groupings of 5 each, then one of those grouping could be matched to a 5 track release that would be okay.
If this option is enabled individual song by song matching to the best album does not take place.