That setting has two purposes:
It can be used to issue a batch of download links for files that you have already provided for other products (e.g., to sell a full-album product that issues links for individual-track files that are already being sold separately). You would enable that setting, then a list will appear where you can select the other products whose files should be issued for the package product.
It can also be used to "bundle" tangible goods together in a "package deal", where you are using Inventory Control for the individual products and want sales of the bundle/package product to affect the inventory counts for those individual products as well. You would enable that setting, then a list will appear where you can select the other products whose inventory stock should be affected for each sale of the package product.
If you're not selling downloads nor using Inventory Control, then you can create package-deal products without using that or any other special setting. Each product you create consists of whatever you understand it to be. E.g., if you're selling Product A and Product B separately, you can create a Product C at some special price point that you understand to be the same as ordering A and B together at that price.