What does this option actually enable/disable in Firewall >> General Setup ?

The manual says:

"All the packets, while transmitting through Vigor router, will be filtered by firewall settings configured by Vigor router if such feature is enabled. If the firewall system does not have any response (pass or block) for these packets, such as no response coming from web content filter, then the router’s firewall will block the packets directly."

Im not clear what this is enabling / disabling.

It's not too well written is it, what it means is, if the router can't contact the external server for web content filtering to check which category the URL is in, it'll block all traffic. This is so that if the WCF servers ever stop working for some reason, local PCs won't have free reign to access the internets.
It only affects the web content filter on the 2830 though so if you're not using that then it'll do nothing.