This option is enabled by default to protect your songs from being split into multiple folders due to sub-optimal matching. If your songs are already organized one folder per album then songs in the folder will only be matched to a release if all songs in that folder can be matched to the same release. Usually SongKong is clever enough to recognise when you have a multi disc release and have created separate folders per disc as well, in this case it will only allow a match if songs in each sub-folder are matched to a disc of the same release.
Usually this option should be enabled because if even if you some have folders containing a random assortment of files SongKong can still use Acoustid matching to identify these songs adding the correct artist and song title, but without matching the album metadata and without renaming these files. These songs are listed in the Match to MusicBrainz song only section of the report. This is useful because it allows identification of those songs that are completely unidentified and matching the basic song information may be enough to allow the songs to be identified to a Discogs album in the next stage.
If you disable this option then if SongKong fails to match the folder to a MusicBrainz album it will then try and group the songs in the folder into smaller groupings based on their existing metadata, if this fails and matching to Discogs fails as well it then does individual song by song matching and will match each song to the best album it can find with the limited information available.