On = Match only separate words.
layer » layer
Off (substring search) = Find also appearances of the search term inside other, longer words.
layer » layers, player, ...

This option is of interest when searching with two or more search terms.
On = All search terms must occur on the page, not necessarily in the same order though.
Off = Find pages that contain at least one of the given search terms.

Search for an exact phrase by enclosing the terms with "double quotation marks". Searching for "light layer" would not return pages anymore where the words 'light' and 'layer' are found separately, or in a different order then specified.
You can also combine search techniques:
"light layer" -player » Servers offer a Light Layer to...

The questionmark (?) represents any single character.
la?er » layer, laser, ...
The asterisk character (*) in a search term represents any number of characters.
la*er » layer, larger, lavender, ...

Precede a search term with a hyphen character (-) to exclude it from the results.
light -layer » light effect, light color, light ...

The search term must have at least two characters.

The search is not case-sensitive, not even when looking for "exact phrases".
layer » Layer, LAYER, ...