Some providers like Twitch have upper limits on the bitrate for video and audio. If this option is enabled, OBS will never exceed the settings specified by the provider.
The limits for Twitch are set at 6000kbps for video bitrate and 160kbps for audio bitrate. We generally keep these up to date with the latest requirements from any service provider.
Downscaling video downscales the entire scene on the GPU which is very efficient. Downscaling for a specific output uses CPU which is far less efficient.