With this checked, the object can only be selected by clicking on the edge (outline).

The normal selection behavior lets you click anywhere inside the bounding box of an item, but in the case of shapes, borders, cloud signs, etc., you may not want to do this because other design elements may be inside this bounding box. Therefore this option may make it easier to select these other elements because it doesn't try to select the outside object.

This option is set per object; it is not a global setting for all objects in the layout.