What is it?
Sound In Preferences lets you choose how sounds will be recorded and the default settings for New sound documents.  Sounds will be record to what ever the current sound document's settings are (sample size/rate, number of tracks selected).

How to use it
Sound In Preferences has the following six parameters, Sample Rate, Sample Size, Number of Channels, Auto Gain, Play Through Speaker While Recording, and Allow Background Tasks.

The Rate popup menu has the choice of all the standard sample rates.  The sound input devices available sample rates are highlighted in the list.  If you get sample rate warnings when trying to record, it's because the sound document's sample rate is not one of those highlighted in the list.  You will need to Resample to one of the highlighted sample rates in order to record sounds.

The Size popup menu has the choice of 8 bit or 16 bit samples.  The sound input devices available sample sizes are highlighted in the list.

The Use popup menu has the choice of Mono or Stereo.  The sound input devices available number of channels are highlighted in the list.

The Auto Gain Control check box when selected, adjusts recording level automatically for best results (at least it tries too).  On many of the newer Macs you can adjust the input gain manually with the track's gain slider on the Controls palette.  If the slider knob is not visible while recording, it's either your Mac doesn't have input gain control or Auto Gain is on.
 
The Play Through Speaker check box when selected, plays the sound through the speaker while recording.

The Background Tasks check box when selected, lets other programs run normally in the background when recording sounds (slower).