Just checked the tool tip for the option.
If it works like it says in the description, toggled on, your ships will chase targets before a move to different planet order.
Toggled off, your ships will ignore enemy ships and move to a different planet.
I'm off to check to see if those actually work.
Added: With the toggle off, my fleet ships moved off the planet when their current target was dead.
With the toggle on, ships will always engage enemy ships before continuing on the move order.