In the install of word press we get the option. I would like my blog to appear in search engines like Google and Technorati. What is this actually doing? Just allowing/disallowing no follow links?
I don't know, if this option is in normal wordpress installation, but it certainly is in registration to wordpress.com I have never researched what this option do. Disallow your blog for SE by robots.txt or meta tags, I suppose. You can change this option later in wordpress administration, if you want.
Yes an option for it is there in every wordpress blog installation. It submits your site to 2 Search Engines - Google and Technoarti. I personally recommend you to choose the option. It'll basically bring you more traffic. The option is of no harm at all.