This setting can be used to keep a session open for hosts that require some activity to avoid a timeout. This is different than a typical host timeout related to actual screen updates and enter keys--it is more to support the Telnet "PING" operation to keep a socket alive.
Sometimes it is network equipment that drives this requirement, which you may learn due to user's sessions being dropped in a few minutes due to no activity.
Setting this to a non-zero value will send a Telnet "ping" every (n) minutes where (n) is the value (if no user keystrokes have occurred during that time-span).