What function does the microphone toggle in the settings menu have?
This microphone toggle switches on and off the human presence detection. The screen has a build in human presence detection which works via sound that is detected by the microphone.
If you would like to know how the human presence detection works, please see this article.
The screen does not have the option to turn the microphone "on" or "off". The microphone is by default on "on" and cannot be turned off.