I would also like to know. I can't find any documentation on the feature and its recommended use. From the fluency and tearing test (in utilities), the output looks much smoother.
I'm wondering if it means that instead of trying to show every frame from the source, even if they don't fit nicely to the refresh rate, it will instead be willing to show interpolated frames that fit nicely and drop the real one. If that is how it works (just a guess), then I think the only side effect is that you see more interpolated frames and fewer real frames.