When enabled, "take max bids under reserve" means that when a max bid is placed that is below the reserve amount, the current bid will jump to that max bid amount.
Ex. Lot 1 has a reserve of $500, with a starting bid of $100. A bidder places a max bid of $400. The current bid will become $400 with this bidder having high bidder status (although still below the reserve).
When disabled, this means that when a max bid is placed that is below the reserve amount, the system will place a bid for the bidder at the lowest competitive increment.
Ex. Lot 1 has a reserve of $500, with a starting bid of $100. A bidder places a max bid of $400. The current bid will become $100 with this bidder having high bidder status (although still below the reserve).