From context help (click "?" besides "x", then click on parameter):
Point features: No duplicate label options are available. One label is always placed per feature part.
Line features: When two or more contiguous features have the same value for the label string, only one label will be placed. This prevents unnecessary duplication of the same label.
For example, in a layer representing the rivers of South America, the Amazon river may be represented by a number of contiguous line features, with each section of the river between each tributary being a separate feature. When this option is selected, the label "Amazon" will be appear just once along the entire river, even though it is made up of several features.
This is the default for line features.
Polygon features: When two or more features have the same value for the label string, only one label will be placed. The features need not be contiguous.