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As long as you're managing a team in the highest-level league, then you'll usually want to keep it on the major league level, unless you're focusing on moving players about in the minors, in which case changing this option could help you better rank your prospects.
What it does is it compares the players to the average skill of whatever league you select. So your stud 19-year-old prospect, even though he'd be rated half a star overall right now at the major league level, might be a 5-star player compared to everyone else in rookie ball. It's very useful for evaluating where your prospects are currently at in their development.
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