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If you get adequate performance with it set to a higher value than your actual screen resolution, there's no need to lower it unless you like the pixelly look.
(more technical explanation: Modern engines don't draw the world directly into the buffer that holds the screen contents, but into another buffer that isn't displayed directly. That then gets used for further rendering (as with water, mirrors, or the ripple when things hit a forcefield), or postprocessed and written into the screen buffer, which the HUD then gets drawn atop. The setting you inquired about presumably caps the size of that offscreen buffer, which would otherwise be the size of the screen.)
Ah! That's a bit clearer - thank you.
Just one more question, if you wouldn't mind: what does setting the option to "Unlimited" do?