If the box is checked, then the 'Select Text Files' dialog will only allow you to select a TEXT type file. This is a file which has been saved as text rather than in a particular word processing format. Any word processor will allow you to save a file as a text file.
If the box is not checked, any file can be selected. However, most applications have no data file. If you select such an application to open, you will be prompted to choose a diferent file.
Note that files that are not of type TEXT are more likely to have 'unprintable' or unsupported characters in them. Characters not supported by the current font show up as blank rectangles.
