If I don't have that set on, my phone keeps dropping its wifi connection. I've seen it with more than one router over the last week. Son in law's phone stays connected no problems, and he has the performance setting off, and much better battery life than I get. So the setting definitely seems to (1) work and (2) suck power like crazy.
Mine never seems to drop connection as long as I am near the same access point. But with the setting off, mine appears to not try to connect to newly present (but known) access points while in standby and only until many seconds after the phone is awakened. With the setting on, it seems to do that in the background.
I am really not sure AT ALL what it is doing with setting on vs. off, this is just casual observation and some speculation on my part...
But there is no denying the setting, when "on", devastates the battery.