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This question already has an answer here:

Should I turn it on or off? Like I may sound stupid but I don't know what it does.

marked as duplicate by Wrigglenite, MrLemon, user106385, GodEmperorDune, Dragonrage Jul 9 '16 at 17:11

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It stands for Augmented Reality.

If you turn it off you see the pokemon on a pre-drawn field of grass rather then on what your camera sees.

It's more battery efficient and you don't have to awkwardly use the gyroscope of your phone to get the Pokémon in sight. Makes catching easier.

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    Actually, I think the additional benefit is that you don't have to awkwardly use the gyroscope of your phone to get the Pokémon in sight. Makes catching easier. – Codestrife Jul 9 '16 at 9:24

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