This policy setting controls whether sites which bypass the proxy server are mapped into the local Intranet security zone. ...

This policy setting controls whether sites which bypass the proxy server are mapped into the local Intranet security zone.

If you enable this policy setting, sites which bypass the proxy server are mapped into the Intranet Zone.

If you disable this policy setting, sites which bypass the proxy server aren't necessarily mapped into the Intranet Zone (other rules might map one there).

If you do not configure this policy setting, users choose whether sites which bypass the proxy server are mapped into the Intranet Zone.