This allows you to specifically limit the results of a report or feed to items which are either:-
a) Current - this is also the default if no option is selected and simply means the current version of the item will be shown
b) Stage - this will show only items that have been Staged (or published to live)
c) Live - this will show only items that have been Approved and made Live.
Note: If the item contains a field which is linked to an item that is *not* Live, the entire item will not be shown. Similarly, a Staged item will not show if a field is linked to an item that is not Staged or Live.