These options affect what happens when you navigate to a new folder.
Note that the Go Up button on the Location bar actually runs the Go UP BACK command - the BACK argument makes UP act like BACK if the previous folder in the history is the parent folder. Because file selection is preserved when going back and forward in the location history, the parent folder will most likely be selected irrespective of the state of this option. So long story short, if you turn this option off and find that when you go up the parent is still selected, that's why!