The advantage of this second mode is that with the Postfix mail server, email to an address in the alias domain will be rejected at the SMTP level. When the catchall mode is selected, email to an invalid address will be forwarded to the target domain and then bounced back to the sender. This can generate significant load on your system and cause email to be sent to incorrect addresses if a spammer is sending email to a large number of addresses within the alias domain.
As with most template settings, this only applies to virtual servers created after the setting was changed.