This controls in which scenarios a change of the date or quantity on a shop order should be replicated to the DOP order or customer order which to it is pegged.

So if you have enabled Qty Decrease for Customer Order Demand, and you reduce the lot size of a shop order, or say scrap more than planned, such decrease of the shop order quantity would be replicated to the customer order when pegged to such.

DOP Order Demand would refer to changes of the quantity and date of the shop order itself, while the DOP Order Supply would refer to changes of the quantity and date of a DOP supplied shop order material line. 

Thanks a lot @Björn Hultgren