This is how much of the capacity of the battery will be left when the talking telemetry tells you you have 0% of the battery left. So on a 5000 mAh pack if you set this to 20% it will tell you you have 0% left (and give you the alarm you set) when you have consumed 4000 mAh.
Set this to what percent of the total you want left in the pack when you land, and fly until the telemetry tells you the pack is empty.