This section is related to the Find More search in the Duplicate Detector Component that sits on Case Page layouts.

Restrict By Record Type:

Admins may opt to only allow Cases of the same Record Type to be merged. When this is enabled, end users will get an error on the merge page and won't be able to merge if the Record Types of the selected cases don't match.

Note: This setting is automatically disabled if no Record Types for Case are found in your organization.