What this does is turns off the rgb subpixel rendering (hinting) option within the X font server itself.
Using subpixel rendering is supposed to make the fonts look sharper on an LCD, but for some reason (at least on my setup), the coloring gets all out of whack. I am not sure if it is because I am using a lower resolution that I notice it more (1280x1024) or what.
Here is an interesting page on subpixel rendering, gives the whole breakdown:
Hope this helps.