This policy setting prevents the system from using NTFS tracking features to resolve a shortcut.
If you enable this policy setting, the system does not try to locate the file by using its file ID. It skips this step and begins a comprehensive search of the drive specified in the target path.
If you disable or do not configure this policy setting, by default, when the system cannot find the target file for a shortcut (.lnk), it searches all paths associated with the shortcut. If the target file is located on an NTFS partition, the system then uses the target's file ID to find a path. If the resulting path is not correct, it conducts a comprehensive search of the target drive in an attempt to find the file.
Note: This policy setting only applies to target files on NTFS partitions. FAT partitions do not have this ID tracking and search capability.
Also, see the "Do not track Shell shortcuts during roaming" and the "Do not use the search-based method when resolving shell shortcuts" policy settings.