Hello! First, sorry by the late to answer.
This means that, if this option is enabled, and a user used your balance, but the order was cancelled, refunded or failed, he receives the value back.
Example:
I’ve $20 in my account, and make a purchase with this money. The value leave from my account. For any reason, the payment was refused, so, if this option is enabled, I’ll receive back $20, and don’t loose any cash.