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Setting the policy to Enabled means Google Chrome permits installation and updates for extensions hosted outside the Chrome Web Store, the content of which might only be minimally protected.
Setting the policy to Disabled means Google Chrome won't permit fresh installation of (and updates to) such extensions. The policy has no effect in Google Chrome 78 and later.
Leaving this policy unset means it is Enabled in Google Chrome 73 to 75, and Disabled in Google Chrome 76 and 77.