This option is available for one-way sync or when you are doing a backup from a source to a target cloud app.
Overwrite all modification on target means that all modifications on the target service will be automatically reverted and replaced by data from the source. If this option is not enabled, when a target file is modified or deleted, the data will not be overwritten.
In other words, changes from a source file will be applied to a target file only if that target file has not been changed. So by not enabling this option, you can modify files on the target service without worrying that your changes will be overwritten.
In short, if this option is not enabled and a file is changed on the target, then file from the source will not overwrite it.