When you activate this option the Maya FBX Plug-in converts edge information to Smoothing Groups and exports them with the file.
When this option is disabled, no edge information is converted to Smoothing Groups.
The FBX Collada exporter does not export Smoothing Groups data from 3ds Max. Because of this, the FBX Collada importer will generate Smoothing Groups during the import process.
If you disable the Smoothing Groups option, no Smoothing Groups are generated by the FBX Collada importer.