While it is not 100% true, generally speaking the longer a password is, the harder it is for a password cracking tool to figure it out. Longer passwords have exponentially more possible combinations, so they are harder to break and, therefore, more secure.
With this policy setting, you can assign a minimum number of characters for account passwords. The number can be anything from 0 to 14. It is generally recommended that passwords be a minimum of 7 or 8 characters to make them sufficiently secure.