This setting determines the url format of your posts and pages. The default settings uses web urls with question mark and numbers. However, for a SEO benefits you should use SEO friendly urls.
For the best setting, check the “Post name” and WordPress will automatically write the code on the “Custom Structure” field.
Don’t forget to save your changes by clicking the “Save Changes” button below the page. It amuses me when a lot of clients say “it doesn’t work!” when they simply forgot to click that “save” button.