Thinking about this more...
If this option is enabled, it will allow you to select the revision from a drop down on the "create object" wizard in Windchill.
If the lifecycle template allows revise (like mentioned above), then you simply use the revise icon to set the target revision letter.
You may want to also read this article: https://support.ptc.com/appserver/cs/view/solution.jsp?n=CS127643