This is an option in the condition section of Gift on cart rule. The option is only used in case you use multi rules.
Example: You want to have 2 rules.
Rule1: Buy 2 product get free gift A. At this rule you check the option "Use gift(s) in condition of other gift on cart rules"
Rule2: Buy 3 product get free gift B.
Then if an customer buy 2 product, he will get product A is free. SO now in the cart there are 3 product (include A) so the rule2 is satisfied, then customer also get free gift: B.