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The MSDN documenation states: Indicates whether SQL Server uses the column as a ROWGUID. You can set this value to Yes only for a unique identity column.
This doesn’t tell me why I would have this enabled or disabled.
Setting the column as ROWGUID tells SQL Server that that row will be used as a GUID. By default SQL Server will set the default value of the row to NewID() which will generate a GUID.
So, you would use it when you want to use GUIDs, which are globally unique. This makes them useful for replicating and merging databases since you know that no two rows will ever (theoretically) have the same id.