Supposedly it ID's certain games and/or post rendering techniques where it can optimize for better performance. ATi engineers know about such situations, and they can let the driver "see" it and use it to it's advantage.
NONE - Disabled
LIGHT - Runs in low key mode and sort of dismisses artifacts because of optimization gone wrong or to far
HIGH - Runs fully, regardless of artifacts (if present). If you use this one, and see some weird sh*t, drop back to light.
I haven't paid much attention to the AI - as no one actually knows just wich game or instance of post rendering in which scenario can benefit from this. Leaving it at high is okay, until you get some issues.