This policy settings controls whether the Custom tab shows as the default tab under File > New in Word, Excel, and PowerPoint.
The Custom tab shows the custom templates that are available. If there aren't any custom templates, the Custom tab can't be shown.
If you enable this policy setting, users will see the Custom tab as the default tab when creating a new file by going to File > New.
If you disable or don't configure this policy setting, users will see the Featured tab as the default tab when creating a new file by going to File > New, unless access to Office-provided templates has been disabled.
Note: This policy setting only applies to subscription versions of Office, such as Microsoft 365 Apps for enterprise.