“Displays have separate Spaces” changes the relationship between connected monitors and macOS Spaces. When enabled, each display has its own Spaces context instead of all displays moving as one combined desktop set.
What changes when it is on
Apple states that the Dock is available on all displays. The setting is also required for Stage Manager and for Split View on displays beyond the main one. Mission Control entered on a second display shows the windows and Spaces being used on that display.
This can be useful when one monitor should stay on a reference desktop while another switches between project desktops.
What to test before choosing
Switch Spaces on one display and observe what the other display shows. Open Mission Control from each screen. Test one full-screen window, one Split View pair, and an app assigned to a display-specific desktop.
Changing the option can alter a familiar multi-monitor workflow, and macOS may require logging out for it to take effect. Save work and treat it as a navigation-model change.
Keep roles separate
The setting controls Space behavior, not window grouping by outcome. It does not save layouts, preserve application state, or prove that a window belongs to a project. If per-display Spaces already make every window easy to find, keep the setup simple. Add titles or project groups only when identification still fails across apps.
Document the chosen state when troubleshooting Stage Manager, Split View, or inconsistent Space switching so later advice refers to the same configuration.