This option is needed in a Prepare sequence for an approval workflow. For that reason, you should enable it only if the sequence will be used in such a workflow. This lets customer approvals be set up even without a proof.
Caution: This option may not be enabled in a Portal Services workflow!
"Production Approval Follows Customer Approval Automatically" option
Processed pages that were approved by the customer and given the appropriate status are released automatically for production if you enable this option. This means their status is "Production approval is OK".
"Layout Approval Follows Page Approval Automatically" option
Processed sheet layouts, following approval of the pages by the customer and assignment of the appropriate status, are released automatically for production if you enable this option. This means their status is "Production approval is OK".