This is rather enigmatic, and the remarks section doesn't make it much clearer when it says, "Set this property to true to avoid setting the ID of an element automatically."
This flag was added late in the developer of Windows 8 to get around a memory leak. What was happening before is that WinJS was automatically creating an ID property for all elements involved in data binding, due to the implementation of its binding engine. However, this introduced the leak because the table in which the wwahost.exe process stores such IDs never gets cleaned up.
Generally speaking, apps didn't depend on these IDs being created, so the WinJS team could have just made the change internally and no one would've noticed. However, it did constitute a breaking change so the optimizeBindingReferences flag was added such that an app that did have that dependency could turn it off.
The bottom line is that apps should set this flag to true and leave it set, thereby reducing the app's memory footprint.