Let's start with asking the question, if DRS is aimed at distributing resources and ensuring a balance in the cluster, why should there be a setting to increase or decrease the effectiveness of DRS?

To answer that, we should understand what potential negative influence DRS could have. To be fair, DRS means no ill intent; however, when vMotion is initiated, there is an overhead cost on two accounts:

The workload may experience a momentary freeze (a few pings drop)
Additional task on vCenter

Both these are subjective to the sensitivity of the environment; that is, in a test and development environment, wherein a cluster is fully populated with VMs, you may reap very little benefit with a very aggressive setting of DRS. This would likely set off a ping-pong of VMs across the host, impacting both the workload and vCenter. On a similar note, in a production environment, a critical workload may benefit even with the slightest improvement in performance, thereby DRS can be set to be more aggressive than the default.

The threshold has five settings, ranging from 1 to 5, with 5 being most aggressive. The logic behind the settings is fairly simple. The recommendations at the backend have five levels of recommendation priority. With every level of DRS setting, the equivalent level of recommendations gets applied. For instance, at level 4, recommendations of one-four priorities are applied.