I think this is the number of bytes under which variables are considered "small" (i.e. included in small data areas). So you've currently configured it to 8 bytes, which means all variables of 8 bytes or less will be put in .bss/.sdata (or .sdata2/.sbss2 for constants).
The .lcf (linker file) is the mean to place you small data areas into the appropriate memory. Not this window.
