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Setting the policy to Enabled means Google ChromeOS asks users for a password to unlock the device when it suspends or the lid is closed.
Devices will lock when the lid is closed except if they are docked (using an external monitor). In such a case, the device will not lock when the lid closes, but will lock if the external monitor is removed and the lid is still closed.
Until Google ChromeOS M106, this policy would only lock the device when it suspends. From M106 onwards, this policy will lock the device when it suspends or the lid is closed.
By setting this policy to Enabled, and LidCloseAction to LidCloseActionDoNothing, a device will lock when the lid is closed, but will only suspend if and when configured to do so in PowerManagementIdleSettings.
Note that if this policy is set to Enabled and AllowScreenLock is set to Disabled, the device cannot be locked and the user will be logged out instead.
Setting the policy to Disabled means users are not asked for a password to unlock the device.
Leaving the policy unset lets the user choose whether to be prompted for a password to unlock the device.