It's used to fine tune the IR output.
Typically the camera manages this pretty well automatically. If you want to experiment, turn the feature on and set the Mode to Manual. Adjust the Distance slider to fine tune.
From the documentation:
Smart Supplement Light gives user an option to turn ON/OFF the supplement light.
Set the supplement light to ON, and Auto and Manual are selectable for light mode. Select AUTO, and the supplement light changes according to the actual luminance. E.g., if the current scene is bright enough, then the supplement light adjusts itself to lower power; and if the scene is not bright enough, the light adjusts itself to higher power.
Select Manual, and you can adjust the supplement by adjusting the distance. E.g., If the object is near the camera, the device adjusts the supplement light to lower power, and the light is in higher power if the object is far away.