It allows you to set the number of decimal places that Rhino displays with numbers in the command line/status bar. Dimension display precision is set separately in dimension styles; both are independent of the file tolerance settings.
Rhino always calculates stuff out to like 12 decimal places, but you with this setting can choose how many you think are significant to see. It’s purely visual and does not affect calculations in any way.
We had hail in Oregon today. Now the display precision is working again. No computer re-boot since I reported it not working. Restarted Rhino previously but that made no difference. So it must be the hail, a rare event just like the display precision not working. One cancelled the other. Have a good day. Mine is looking brighter now with the sun back out after the hail and display precision working again.