@nynaevelan - it just stops if the output path already exists. It was primarily designed for someone who only wanted to do one backup a day, so they can now specify the date in the output path and leave this field unticked.
@Vyper - i'm sorry the option text mislead you, as i've just said it just checks that the output path does not already exist, so if you're reusing the same path all the time (like I am) then you should tick the field.
Personally, I use "F:\Backup\MediaMonkey\" as my output path so I've always got the latest backup in there (therefore I have the overwrite field ticked). I then have the archive path as "F:\Backup\<Y><M><D>_MediaMonkey.zip" so that I get a separate backup each day which allows me to restore to any point - very useful when testing new scripts!!