This policy setting sets the "Enable fill handle and cell drag-and-drop" option found under File tab | Options | Advanced ...

This policy setting sets the "Enable fill handle and cell drag-and-drop" option found under File tab | Options | Advanced | Editing Options.

If you enable or do not configure this policy setting, Excel will enable the fill handle and allow drag-and-drop.  This is the default behavior.

If you disable this policy setting, Excel will disable the fill handle and drag-and-drop will not be allowed.