Digits used in display refers to the number of digits put on the screen as the result of a numerical computation. This setting does not affect accuracy in computations, but if you enter a floating-point number in a document using a larger number of digits than the setting under Digits Used in Display, scientific notation is returned when you choose Evaluate or Evaluate Numerically. Recall that when you enter numbers in decimal (floating-point) notation, Evaluate and Evaluate Numerically have the same effect.
Numbers are correctly rounded, depending on the value you have set for Digits Used in Display. As a general rule, you could reasonably set Digits Used in Display to the number of places determined by your least accurate measurement.