In ID CS6 the Pages panel menu has a page attributes submenu and one of the items is Optional in Liquid HTML5. Can anyone explain what this does when turned on/off?
I don't think it does anything. There is no way now to generate "Liquid HTML5" in InDesign, but I think the intention is to move toward this in the Digital Publishing Suite (which uses HTML5) and ePub (which uses HTML5, expecially in EPUB3 standard.
There was an Adobe tech demo some time ago showing an export to HTML5 which dynamically retains liquid layout capabilities in the browser. The demo was pre-CS6, so I'm guessing they didn't get the feature ready in time for the initial release or even reserved it for a Creative Cloud update to ID CS6 on purpose.
Here is a video recording demonstrating liquid layout (which has since shipped) and then the HTML5 export:
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