If this option is checked, the Create New | Content Pack option displays on the Libraries tab and users can create content packs from any documents or files in their Salesforce CRM Content private or public libraries.

If this option is not checked after users in your organization have already created content packs, those packs are not deleted and users can continue to modify metadata such as description, title, and custom fields. However, once content pack creation is no longer enabled, users cannot customize or modify existing packs. Specifically, the Clone & Customize button and the Edit | Edit Content Pack option on the content details page are unavailable.

Cheers!!!