This policy setting allows you to have file names sorted literally (as in Windows 2000 and earlier) rather than in numerical ...

This policy setting allows you to have file names sorted literally (as in Windows 2000 and earlier) rather than in numerical order. 
If you enable this policy setting, File Explorer will sort file names by each digit in a file name (for example, 111 < 22 < 3).
If you disable or do not configure this policy setting, File Explorer will sort file names by increasing number value (for example, 3 < 22 < 111).