Dip switches are actual hardware switches on the main circuit boards of arcade and computer machiness. Most often they were used to configure lives, difficulty and coin values for arcade machines as well as many other options on computers and consoles.
The options that show up are fairly self explanitary but if you mess it up you can delete the .cfg
file for the running system in the C:\Mame\cfg
folder and any changes will revert back to default. Also, if you change anything on this menu then you need to use the "Reset" option at the bottom of the menu to enable the changes. This will restart the machine with the new settings.