This setting controls whether your device should check with Google to see if an app you are attempting to install may be harmful, before it installs the app. It may be useful for providing some protection when installing apps from non-approved sources, such as if Unknown sources is enabled.
When this setting is enabled, prior to installation of any app your device will provide Google with information about the app you are installing. If Google reports that the app may be harmful, the installation will be blocked, or you may be shown a warning before you can continue installation.
Note that failure to see this warning should not be interpreted as a sign that the app is safe to install.
It should also be noted the privacy implication of this setting: Google will be able to know what apps you are attempting to install even when you didn't obtain the app from Google.