This switches between full-color and black-and-white screen display (all types of output have independent color switches). Displays with more than 16 colors may show true gray-scale rather than the dithering which is used in actual black-and-white output. You can set the default or start-up status of this switch in the Preferences dialog in the Settings menu.
Even if your display is color it may be useful to view the image in black-and-white to see what it will look like in black-and-white files or printing.