Right next to the togglswitch, there’s a learn more link that explains in more detail...
Tracking
Apple requires app developers to ask for permission before they track you or your
device across apps or websites they don’t own in order to target advertising to you,
measure your actions due to advertising, or to share your information with data
brokers.
If you give your permission to be tracked, the app can allow information about you or
your device collected through the app (for example, a user or device ID, your
device's current advertising identifier, your name, email address, or other identifying
data provided by you) to be combined with information about you or your device
collected by third parties. The combined information can then be used by the app
developer or third parties for purposes of targeted advertising or advertising
measurement. The app developer may also choose to share the information with
data brokers, which may result in the linking of publicly available and other
information about you or your device.
When you decline to give permission for the app to track you, the app is prevented
from accessing your device's advertising identifier (previously controlled through the
Limit Ad Tracking setting on your device). App developers are responsible for
ensuring they comply with your choices.
In some circumstances, the app developer is not required by Apple to ask for your
permission. The app developer may combine information about you or your device
for targeted advertising or advertising measurement purposes without your
permission if the developer is doing so solely on your device and not sending the
information off your device in a way that identifies you. In addition, the app developer
may share information about you or your device with data brokers without your
permission for fraud detection or prevention or security purposes. However, the data
broker must be performing the fraud detection or prevention or security services
only on behalf of the app developer, which means the data broker cannot use the
information about you or your device for any other purposes.
You can control whether apps can ask for permission to track you. If you don't want
to be asked for your permission by each app that wants to track you, you can disable
Allow Apps to Ask to Track. On iOS and iPadOS, go to Settings > Privacy > Tracking.
On tvOS, go to Settings > General > Privacy > Tracking. When you disable Allow
Apps to Ask to Track, any app that attempts to ask for your permission will be
blocked from asking and automatically informed that you have requested not to be
tracked. If you previously gave apps permission to track, you can tell those apps to
stop tracking you at the same time you disable Allow Apps to Ask to Track.
You can also control the tracking permission on a per-app basis. On iOS or iPadOS,
go to Settings, tap an app, then tap to turn off Allow Tracking, or go to Settings >
Privacy > Tracking and tap to turn on or off each app displayed in the list of apps that
have requested permission to track you. On tvOS, go to Settings > General > Privacy
> Tracking and select the app in the list below Tracking.