Hi Edmund
Good question. It will not be possible for you see the effect of that check box until or unless you go a little deep.
The first thing is that you need to create a local connection:
Select a SAP BW OLE DB Provider. Provide the details as requested and finally select a SAP BW InfoCube from which you want to read data.
Once this connection is created, connect to it. Create a new report and it will take you to the report editor. At this point, that option is not selected and you see all dimension trees expanded.
On turning the option on, here is how the report editor will show up the dimensions:
Hope this answers your question.