Hi,
When you turn on that option, the variants of the product are generated automatically when you save a product with characteristics attached to it. If you make a mistake and add too many characteristics and/or characteristics with too many values, the system could end up generating a hell of a lot more variants than your server can handle, resulting in that fatal error you had.
When you turn off that option, the variants are not generated, and it's up to you to create them with the "new" button on that variants listing.
Turning off that option is not the solution to your problem. Jerome simply wanted to tell you that the root of the issue came from the fact that the system had generated too many variants because of how you added the characteristics to (some of) the products.
The issue is that you must have been doing something wrong with the characteristics which ended up with the system generating so many variants for your products that the website is getting slow.