It's not related to running Solr in cloud mode (as a "cluster").
It enables or disables the Clustering component - i.e. clustering of result sets.
The clustering (or cluster analysis) plugin attempts to automatically discover groups of related search hits (documents) and assign human-readable labels to these groups.
By default in Solr, the clustering algorithm is applied to the search result of each single query -— this is called an on-line clustering. While Solr contains an extension for full-index clustering (off-line clustering) this section will focus on discussing on-line clustering only.