From my limited understanding of web trackers, tracking companies like Facebook & Google and other 3rd party trackers like to identify unique users on the internet so that they can be served targeted ads suited to that unique user's traits. They do this by creating unique 'Fingerprints' for these users by taking note of their browser characteristics like Timezone, Screen resolution, Fonts, Language preferences, etc.

This setting simply resets this fingerprint daily so that these tracking companies are not able to track you on the basis of your browser attributes. if you turn this on it will increase your privacy but will break some websites.

Here is Firefox's feature page for fingerprint blocking.

From what I understand about the specific setting you are referencing, the information typically used to build profiles is randomized each day.

My experience with fingerprint blocking in general has been cumbersome. The changes to time, window sizes, colors, etc., ultimately lowered the convenience and quality of life of my overall browsing experience.

I'm sure with the right setup, application, and mindset someone could find fingerprint blocking in it's current form to be useful.