That option is controlled directly by the Addon Manager "Force HD textures", which act both on the FSX.CFG (so it will be saved for the next restart) but also in memory, so you can check the results visually without having to restart FSX.
It's used by KLAX and CYVR, without it, the scenery will look less sharp. Whether you are prepared to accept that quality degradation, is really up to you but, in general, you should set it on, to use these sceneries at their native resolution. The setting is of course global so, by changing, it will change any other product that uses textures larger than 1024x1024.