@mackaj I discussed this already with someone and came up with this:
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I think that control just has to do with whether replies from other people (to a post in a list) are also visible to me within that list.

So the choices are:

I wanna see replies to these posts IF they’re from people I follow.

I don’t wanna see replies from anyone unless I’ve also placed them in this List.

I don’t wanna see any replies to these posts in this list at all.