Definition: When set to OFF, the plug-in ignores the dynamic cluster list used for load balancing requests proxied from the plug-in and only uses the static list specified with the WebLogicCluster parameter. Normally this parameter should remain set to ON.
That parameter makes the server list used in the cluster to be dynamically generated.
So if the node names are not stated in the relevant configuration file (mod_wl_ohs.conf), you can use this parameter to automatically detect the cluster nodes.
The document in question suggests that setting in order to make Oracle dynamically detect the cluster nodes.
Check this thread as well ->
http://erman-arslan-s-oracle-forum.2340467.n4.nabble.com/question-on-mod-wl-ohs-conf-and-apps-conf-td4475.html