it tells Oracle you are using a star schema design (data warehouse) and it will allow oracle to rewrite your query (during parsing?) to utilize the star schema architecture.
I don't know how much it helps, but I couldn't see NOT using it.
look at the docs for Datawarehousing. It's pretty self explained.
However - this only has benefit when dealing with an actual star schema. Oracle support just had us turn the option off (disclaimer: It was not I that turned it on - we are OLTP) - they suspect that it might be the cause of some problems. I am told there have been issues related to that option.