It's the number of decimal places used to store the coordinates of model vertices.
I sometimes use it to reduce file size if i don't need 6 decimal places, i.e. if my project units are meters, and the polygon size is in the order of centimeters, then i may not need sub-millimeter precision so could turn it down to 3.
Conversely if you're working on a geographic scale, with degrees lat and long instead of local coordinates, then 6 decimal places might only give you centimeter level precision and you may have to increase it depending on your application.