When an image specified by a pathname (or URL) is not found or cannot be loaded, it is replaced with a placeholder (i.e. a special icon indicating the image failure).
If this option is selected, in addition to the placeholders, the failed image's pathnames (or URLs) will be shown in the generated RTF, so you could see where the generator tried to find those images.
Note, since the file pathnames tend to be long nonbreaking strings, appearing them in the generated document may considerably distort its formatting layout. That's why this option was introduced.