When enabled, the app uses the iOS Mail client to send email using the general mail settings defined for your device in the device settings. You will not be able to send properly formatted PGP/MIME messages with the default mail settings, though most PGP mail clients (enigmail, GPGMail) do an OK job handling these non-standard messages.
Disable this option to configure a custom SMTP server for sending PGP/MIME messages in the correct format.
When using the default iOS mail (above), this option puts your messages "inline" (in the body of the mail message). If this option is disabled, the PGP message will be added as an attachment and not included in the body of the message. Some mail clients do a better job of handling PGP when it is sent as an attachment rather than in the body.