Set it to true if you want N4 to log the custom Web Service messages in the Web Service Logs view (on page 1).
This setting is meant to enable/disable logging of custom Web Service messages in the Web Service Logs view and is not for logging of custom Web Service messages for Groovy APIs. To enable messages for Groovy APIs to appear in the Web Service Logs view, you need to set ARGOWEBSERVICE008 (WS_LOG_GROOVY) (on page 1) to true.