Checking this box means that you want to use Alternative Hit Registration.
Not-checking it means that you want to use Valve Hit Registration.
Valve Hit Registration
It is original Valve netcode.
Pro: use less CPU than Alternative Hit registration
Cons: it is not as accurate as Alternative hitreg meaning that very often you hit the opponent even if your crosshair is not on him and in the contrary you don't hit him even if he is in your crosshair.
Alternative Hit Registration
It is a specific netcode that we specially developped for AG2 due to the speed of the game.
Pro: very good hitreg accuracy meaning that you only have to put your crosshair on your enemy and you're sure to hit him. No need to think where your opponent could be server side.
Cons: it is stressing a little more your CPU. Fortunately it is not really significant.