This option creates the collision areas for the players and monsters. Each object from your map (if its collision parameter is set true ) and the inaccessible areas (see also: inaccessible terrain tool) is checked for this action. From the bounding boxes of the objects and the inaccessible areas the no-go-area is computed. You can preview the pathing in Editing mode by toggling 'View - Path mesh preview' from the menu. As long as you have not created any pathing the player or your monsters cannot walk anywhere.