What exactly does the Run without Screen Refresh option for custom blocks do?

It makes a script run extremely fast. For example, if I put used this script with run without screen refresh, it would complete instantly:

 
define 
repeat (1000)
change [number v] by (1)
end

Essentially, it runs a script before the next time the screen updates. However, if you overload a custom block, it can create bad lag.
To learn more about custom blocks, you can go here: https://en.scratch-wiki.info/wiki/My_Blocks

“Run without Screen Refresh” is basically “run without delays in loops”.*
*However, see this.

blue__blob wrote:

What exactly does the Run without Screen Refresh option for custom blocks do?

Running without screen refresh means that the code will be run without scratch's screen being refreshed (updated)

BUT be aware that if it doesn't complete quickly enough (I think 0.5 seconds) a custom block will lag very badly. Best to test without the option ticked initially or at least save before testing.

I hear that the Run without Screen Refresh setting can be used to reduce lag in games and other programs. How does one do this?

I was experimenting with the possibility of using the setting to reduce lag in this.

blue__blob wrote:

I hear that the Run without Screen Refresh setting can be used to reduce lag in games and other programs. How does one do this?

I was experimenting with the possibility of using the setting to reduce lag in this.

Run without screen refesh is mostly used to run loops faster. Your project doesn't seem to need run without screen refresh. Try to limit the use of “touching color” if you want to reduce lag. The touching color block is notorious for the lag it creates.

Well, I used colors for collision detection so that the program can distinguish between different faces of an object, and getting rid of them would be quite tedious. I will keep your advice in mind for future reference, though, and put in a little extra effort to avoid more

 <touching color [#f89bc6] ?> 

blocks.
Thanks for telling me about the lag on that; I didn’t know about that.

Here is a more detailed explanation about exactly what “run without screen refresh” does: https://scratch.mit.edu/discuss/post/3680406/

(You can start reading at the top of that page for even more info on how Scratch runs)