As far I understand, if it's enabled, it should play YouTube videos in the app. But even after enabling it, it's switching to the YouTube app when I click on a YouTube link. I tried disabling it, and the result is the same.
Probably leftover from the old app, it's really unfortunate that it doesn't work because half the garbage I click on here I want nothing to do with my watch history on my account. If I'm not on top of it, it'll completely destroy my already terrible recommendations.
The Android Youtube plugin does not work anymore, Google has discontinued it, that's why it is disabled even if the setting is checked. I'll remove the setting.