Low Quality Preview reduces the resolution of the preview, without affecting the final exported video.
A lower resolution means significantly less pixels to draw during preview, which can improve preview performance at the expense of visual clarity, although in some cases turning this setting off can actually improve performance. If you are experiencing issues with preview performance, try changing this setting.
Note that this will not reduce all types of lag, only lag caused by peaks in processing usage due to having a lot of effects (such as blur) to process on screen at the same time. It will not affect export, including errors in any way. Note that this option applies only to Android devices, and it is not available on iPhone or iPad because they manage preview resolution automatically.