This policy setting allows you to choose if checked-out files are saved to the server drafts location or the web server. ...

This policy setting allows you to choose if checked-out files are saved to the server drafts location or the web server. 

If you enable this policy setting, you can choose where checked-out files are saved:
- Server drafts location: The server drafts location on this computer
- Web server: The web server

If you disable or do not configure this policy setting, checked-out files are stored in the server drafts location.