It's a percentage that influences how much xp you get from lessons I assume. Right now you're getting 10% less xp than you would normally get from lessons. (So for example, if you would get 100 xp from a lesson, then you will get only 90, because 10 is taken out)
i don't know if those affects stuff outside of the lessons thenselves tho
XP doesn’t affect anything that matters. Your kao-chan will grow slower if you have that turned on. You can turn off motivational features if you feel like they’re counterproductive.