The Host name and Domain name are combined to form a unique label that is mapped to the router IP address. This can be used to access the user interface of the router with a local name rather than by using the router IP address. For example, you can access your router by entering http://NF18ACV into your web browser.
It should therefore be safe to enable it, but you could easily archive the same with pihole's "Local DNS records". Just create a IP <-> domain assignment with IP of your router and domain NF18ACV (or whatever you like)