The Flatten Composite Glyphs option allows for the correct processing of rare TrueType and OpenType fonts made from piled-up blocks instead of common contours.
Left: glyphs made from piled-up blocks. Right: glyphs flattened to contours.
Fonts made from blocks are relatively rare. However, if you want to convert such a font into embroidery, flattening is necessary.
Note: Do not use flattening on fonts that are not composite; it will eliminate openings in glyphs.