This option give the sim permission to adjust your defensive positioning by up to +/- 2 based on the offense of the opposing team.
The amount of the adjustment is based on the percentage of points the opposing team is scoring from outside vs. inside. For example, if you set your defense to a -2 and the other team is producing a 20 of their 30 total first half points from the perimeter, your defensive positioning would be adjusted to a 0 to come out and help guard the perimeter.
Please keep in mind that there won't necessarily be an adjustment at halftime even if your criteria for adjustment are met. The sim will only adjust if you're adjustment criteria are met AND your opponent is scoring a significant percentage from the inside or outside relative to your defensive positioning. Sometimes you may be losing but you're applying the correct defensive positioning, so no adjustment will be made.