tarator To answer your specific question some additional details:
You can enable or disable the federation, which basically means if your instance is allowed to fetch music from other servers and share music with other servers. This is possible restricted by the two other settings.
You can allow visitors of your page to consume content without being logged in. This might be useful for publishers or creators running their own Funkwhale instance. This way the content is available without authentication. Users from other instances are able to consume the content even if this is disabled, since they are authenticated. On the other side users are not able to see anything if there is no public content. This setting is a technical one, which allows admins to restrict the load on the servers, if they want to.
The library visibility defines per library who is able to consume the content. You can use the library only on your own, share it with your pod or with anyone. Please note you are responsible to follow your local copyright laws if you don't own the rights on the content. This setting is done by the user who uploads the content.
I hope this sheds some light. If you have further questions, feel free to ask!