If this option is set to 'No' users are not allowed to upload files called 'Größe.jpg' or with any other special character in the file name.
Most people have this option set to 'Yes' because JoomGallery takes care of the necessary replacements in order to create a filesystem-safe file name.
Additionally, with another option in the configuration manager administrators can specify the replacements done for the file names.
Thus, it makes sense to just always allow the upload of files with special characters and therefore remove this option from the configuration manager.
If somebody has a valid reason not to remove this option, please post here. Otherwise this option will be removed with version 4.0 of JoomGallery.
Glad to hear that it will be defaulted on if the option is removed. The only minor reason I could think of for having the feature is if someone is not using UTF-8 for their encoding. This would only apply to community sites. But with a community site it makes more sense to allow for their native characters to shine. My vote is to have the option removed.