You should turn this on if you want the HTML attributes height and width to reflect the actual size of the image after it has been resized by the plugin. One of the reasons you might want to activate this is if you have some screen size issues with images that are handled by JavaScript after they are resized by ShortPixel.
Please notice that this alters the attributes, it does not add them if they are missing. Therefore, this does not solve the warning “Image elements do not have explicit width and height” on PageSpeed Insights.