This is a setting that lives within Renewal Settings of Subscriptions. It deals with the question of : 'What happens when we unfreeze a subscription?'

If toggled on, it preserves their payment schedule and the customer is charged the full price of the subscription on the same day they were normally charged before freezing.

If toggled off, it auto-calculates the prorated amount they owe based on the freeze period.

If you hover over the question mark you'll find a more in-depth explanation.