V-Sync is "short for vertical synchronization, an optional setting on your graphics card that throttles the frames being drawn to match the number of times your monitor refreshes itself every second.”
The article further explains the use of this feature:
“The phrase "vertical synchronization" is an antiquated reference to CRT monitors, which were designed to refresh themselves vertically at regular intervals; modern LCD monitors don't actually have physical refresh cycles, but rather a response time rating (5 milliseconds, for example) that denotes how long it takes a single pixel to change color from black to white. Of course your LCD monitor still needs to query your graphics card for new frames at regular intervals, and is thus still vulnerable to distortion when displaying frames faster or slower than the GPU can render them. When we're speaking of LCD refresh rates, we're actually talking about how often the display polls the input device for a fresh image.”
This setting thus adjusts the frame-rate for the game or app a user is playing with the user’s monitor, so if you are using a 60Hz monitor the game or app will max out at 60 frames per second.
Distortions or graphical problems occur when the GPU starts pumping frames more quickly than the monitor can process or receive them.
V-Sync should thus be enabled when there is a lot of graphical distortion caused by movement during action sequences in games, or when a movie is being screened.
This distortion takes place when individual display frames are rendered faster than the rate in which the monitor refreshes itself (such as when you are playing a game or watching a movie), leading to ‘screen tearing’ in the form of fractured lines or objects that look as if they have been sliced in half. These weird glitches are the result of extra frames overwriting previous frames.
Enabling this feature will thus ensure smooth but slower performance as the graphics card is kept from sending frames to the monitor before the latter is ready to display them.
As to when to disable this feature, the same article recommends:
“Depending on which form of V-Sync you use, enabling it can have a harmful effect on your PC's performance. There are two popular V-Sync algorithms: straight frame buffering and ping-pong buffering (also known as page flipping.)
“The simplest and most common way to solve GPU/monitor sync issues is to create a double (and sometimes triple) frame buffer in system memory where extra frames are stored and fed to the monitor as needed. This buffer ensures a much smoother and more appealing image, but can cause problems when playing games that demand quick responses to onscreen events because the GPU already has two or three frames rendered and stored in the buffer beyond what you're seeing onscreen at any given moment. That means that while the GPU is rendering images in direct response to your actions, there is a miniscule delay (measured in milliseconds) between when you perform those actions and when they actually appear onscreen. Most users will never notice such slight input lag, but hardcore competitive gamers may want to disable frame buffer V-Sync and put up with a few funky graphical effects in exchange for maximum performance.
“Ping-pong buffering doesn't have the same input lag; rather than a straight frame buffer which just backs up excess frames and feeds them to the monitor one at a time, this method of vertical synchronization actually renders multiple frames in video memory at the same time and flips between them every time your monitor requests a new frame from your graphics card. This kind of "page flipping" eliminates the lag from copying a frame from the system memory into video memory, which means there's less input lag and thus less impact on your actions per minute while playing a game like Starcraft II.”
It is thus recommended that the feature be kept enabled unless there is a significant performance boost from disabling it.