The description seems sufficient, but the Never forward non-FQDNs name itself only tells one half of the story. It primarily controls the domain-needed and expand-hosts options in 01-pihole.conf.
Once you enable Pi-hole's DHCP server, the local=/foo/ option will be added to 02-pihole-dhcp.conf, unless Never forward non-FQDNs isn't checked.
I believe this dependency was introduced after FTL 5.3 was released (as a result of a discussion from Private host names not sent to upstream since v5.3.2).