Display group hierarchies:--Checking this box will cause the list of unsubscribed groups to be displayed in an hierarchical fashion when invoking an item in the View groups menu. For example, the first page might display folders named alt, comp, rec, etc. If you then select, say, the comp folder, you can view the next level down in the comp hierarchy, e.g., comp.lang, etc.
If, on the other hand, you do not check the box, then the names of all the unsubscribed groups would appear in a single list; viewing the list could be extremely time consuming when a large number of groups is involved. A good rule of thumb is the following: if your news server offers more than 200 groups, you should probably choose to display the group hierarchies, rather than the raw group names.