When you have it "checked", SMF will generate it's own internal member ID.

When it's "not checked", SMF will use the Mambo generated member ID.

So it's important that you check it if you are already using an existing SMF with user data. Because if you forgot to check it, it is most likely that the mambo generated ID already exists in SMF. This will cause "unique key violation" in inserting member data in SMF! Which basically means, user won't be able to register successfuly.