What does the "Enable NTLMv2" option mean in a Windows tweaker?

"NTLM/v2 has to do with user authentication over a network. The decision on the LMCompatibilityLevel needs to take into account the types of systems used in the environment and how high the threat of attack is. If your O/S is reasonably recent I wouldn't worry about it.

See NTLMv2 in wikipediadotorg.
But even better is this article : The Most Misunderstood Windows Security Setting of All Time."