The option to hide the nameplates of your friends and only show the nameplates of none friends as an alternative to hiding all nameplates or showing all nameplates.
Nameplates can ruin the immersion and can even be uncomfortable to look at in dark worlds but hiding them makes it hard to recognise people especially if it's someone you don't know.
This option would be especially helpful if you hang out with a group of friends in a Friends+ or less popular Public world as unknown users can join any time.