Well if it is checked, it removes the label/company/whatever from browse labels page so it's only visible at a subentry level of another label/company (also on labels page).
So let's say you got 'Serious Company' and 'Less Serious Company' as subsidiary - normally you would have the L company listed at two places: under the first company at S part of the list and in L part of the list respectively, but if you choose subentry for L company, it will disappear from L list and it'll be clickable only under S company in the S part of the list.
Useful for regional/country branches of the same company so they don't appear twice (as for Nintendo - France, America, Europe branches are selected only as subentries).
this is the option
http://img856.imageshack.us/img856/1...0509170032.png