Vlad
Thanks for following up!
In its most basic form, this is an option that specifies that after some period of time (normally 12 hours, or a day, a week, etc.), inactive tabs automatically get cleaned up.
This is effectively like 'house-keeping' - things you're not using eventually disappear, decluttering your tab space of stuff you're likely not working on.
This is typically paired with a very good "omni-search" style flow - that your search bar basically becomes a single place to search for open tabs, history, the internet, and so on. The tab area becomes a staging ground for recent pages (which will load faster), but you access all of these things through the same search method.
In Arc, they combine these things in such a way that you effectively don't even look at your tab system. You can totally hide it, and end up with a window that is only focused on the thing that you're currently doing. It's really compelling - tabs become an afterthought due to the omni-search, and if you really need to find something you were doing recently, the tree-style-tab view allows you to see your access-history (and from where they were accessed due to the nesting).
It sounds weird coming from a traditional tab setup (particularly with horizontal tabs), but I find that this closely mirrors how I think how about getting-things-done (eg. Todoist style). You're only really working on 1 or 2 things at a time, and as you shift contexts, you end up generating "cruft" from opening other tabs, links and whatnot. Knowing that the browser will clean these up removes a garbage-collection step from your tab management.
I know that Orion is not Arc - but they have some really interesting ideas on turning the browser into something that closely matches human-workflows. I don't use Arc anymore as I'm not confident in their security posture, but I deeply miss their UX.