As you can see, the Zen Cart team hasn’t bothered to be very descriptive about what these flags actually do. So I pulled up a few resources, hazarded a few guesses and put together a brief summary of each. After sending it to my client, I thought it might prove helpful to others… so here it is.

Used For Display Purposes Only
If “Yes,” the customer wouldn’t be able to select this attribute. (The option is intended for situations like a drop-down menu, where the default item in the drop-down is a message like, “choose from one of the following options.” You wouldn’t want a customer to choose that as their product option.)

Attribute is Free When Product is Free
It depends on what you’d like to do with the product. Some options can be set to tack on an additional fee (such as selecting a license that grants personal and commercial use); if you want to do that, then setting this option to “no” would allow you to mark an item as free for personal use, but still charge customers who want to buy a commercial license.

Default Attribute to be Marked Selected
When the customer needs to select one of the attribute options (required for “virtual” [downloadable] products), this guarantees that one of the options is selected when the customer adds the product to their cart. (Otherwise, when they order they won’t get a download link for the item they purchased.) This is especially important when there is only one option for the attribute: in such cases, the customer is unlikely to even realize an option needs to be selected (since from their point of view, there aren’t any options)!

Apply Discounts Used by Product Special/Sale
As with Attribute is Free When…, this depends on your personal preferences and whether your attribute options alter the price of the item in question. If, for example, we’re dealing with an item which is composed of a single file download (hence no surcharge added to the product listing’s base price), then it doesn’t really make any difference. If you have product options (like a c.u. license) which come at an additional price, then this flag determines whether or not something like a “store–wide 40% off sale” will apply to that additional fee.

Include in Base Price When Priced by Attributes
This one’s the most vague setting in the list. From what I’ve read, it’s intended for products which have been marked “price by attributes.” So here’s the scenario I came up with to explain the concept to myself: Say you have a shop where you sell costumes. There’s a page where one can buy a Zorro getup. On that page, the customer can choose from various hat, shirt, pants and boot sizes, as well as the material for the foil (sword). In each option group, the cheapest item can be flagged with this Include in Base Price When… option, with the more expensive alternatives adding surcharges (+$5.00) to the base price (as determined by the cheap options).

(But so long as you’re not getting into such customizable products, it doesn’t really matter what you set it to.)

Attribute Required for Text
This should instead be labeled “Attribute Required (for text fields),” because it’s only for cases (such as monogrammed items) where you need the customer to enter text in a box before they can add the item to their cart.

Now as I said, this is what I could find combined with what I presume. If someone more knowledgeable about Zen Cart would like to correct me, please do!