Since &xwp; uses the "9.WarpSans" font in many places to preserve space in dialogs (and since the "System Proportional" font is so ugly), Warp 3 users are a bit in trouble, because that font only comes with &warp4; and above.
By enabling this setting, &xwp; will use the "8.Helv" bitmap font instead of WarpSans. This is a quite compact font too and prettier than "System Proportional" anyway.
Note that you can also copy a Warp 4 version of OS2\DLL\DSPRES.DLL
to your system. See the "FAQ" section in the &xwp; User Guide for details.
This setting works on Warp 4 too, of course.