The whole purpose of this setting, which indeed is not yet officially documented anywhere as far as I can tell, is to give some immediate feedback upon running dotnet run or dotnet watch inside of a terminal.
Without it set to true, on the first run after creating a new .NET core/ .NET 5 app, it might take a few seconds before some actual text feedback is shown, which might confuse the user.
It was started by this issue on GitHub: https://github.com/dotnet/sdk/issues/12227, where you can find more details about the reasoning behind it.
Beside that, if you want to leverage the power of dotnet watch inside VS 2019, it’s also better to have this flag set to true, since the messages that get to the console seem to be more verbose.
"API Watch": {
"commandName": "Executable",
"executablePath": "dotnet",
"commandLineArgs": "watch run",
"workingDirectory": "$(ProjectDir)",
"launchBrowser": true,
"applicationUrl": "https://localhost:5001;http://localhost:5000",
"environmentVariables": {
"ASPNETCORE_ENVIRONMENT": "Development"
},
"dotnetRunMessages": true
}