It reduces the amount of data copied in a single "cycle" of a disk transfer operation. It's set fairly high by default (good for SCSI drives), but IDE drives tend to barf on it, resulting in corrupt data. The new values you've seen in this thread should help.
Also note that you need to make the change for every individual partition.
If you're new to the Amiga, be aware of the infamous >4GB problem. What size is your drive?