Docking Minimap
 

Can someone give me an explanation as to what exactly the docking minimap feature does in each of the options?

It keeps the minimap over the map. You can use it as a "spotlight", as I call it, to show finer details while still seeing areas outside of the minimap range. If you're crafty, you can even match the scales so that zooming in/out will always align with each other (requires unchecking of "Auto Scale").

When you have the Blizzard minimap moved into the Carbonite map it will merge the two together. If it is possible to 'fit' the minimap onto the Carbonite map based on position & scale, it will. In the situations where the two maps cannot be aligned the minimap is docked (top left by default). The various options control when and where the map is docked.

As ChaosInc stated above, if you have the auto scaling turned off it is much easier to keep the two maps lined up.