I have to admit that I've never seen this dialog before...
Using guides is entirely optional, and their purpose is to help you line up objects.
The easiest way to create them is to click and drag from the ruler.
I would suggest continuing to use fitted guides as it will ensure complete alignment on your projects. InDesign gives the option to fit to either fit guides to margins or page. Below is an image showing the difference between these two settings.
Unless you plan on using bleed, I would suggest using fit to margins. The margin you use is varied by what document you plan on building. If you want to find more information on margins, you can look at InDesign CS6 Margins for Beginners
Typically you would be designing within the margin area, so when setting up guides it's more practical to fit to the margin.
Let me know if this helps,
The choice depends entirely on what you are doing, but in most cases I think you would want to pick margins.
Thanks very much.
Am doing a book and will check out the link.