When on, subdivides mesh faces to displace the map accurately, using the method and settings you specify in the Subdivision Presets and Subdivision Method group boxes. When off, the modifier applies the map by moving vertices in the mesh, the way the Displace modifier does. Default=on.
Affects the seams of displaced mesh objects; also affects texture mapping. When on, the mesh is split into individual faces before displacing them; this helps preserve texture mapping. When off, texture mapping is assigned using an internal method. Default=on.
The controls in these two groups specify how the modifier applies the displacement map when Custom Settings and Subdivision Displacement are both turned on. They are identical to the Surface Approximation controls used for NURBS surfaces.