I got a response from Pegasys on this setting. I'e seen a lot of assumptions on it, but this is from them:

Hi Lannie,

This setting controls whether or not the frame is split into two fields when being compressed into the stream. This feature is important to create M-JPEG streams compatible with older hardware decompressors that do not support frames larger than 240 pixels high. The edit box/spinner allows you to specify the number of scanlines above which the frame will be split into two fields. Unchecking the box disables interleaving and all the interleaving UI.

Note: Best results will be obtained by understanding whether or not the capture device used interleaving, and setting this parameter to emulate the approach taken by the capture device.

Hope this helps. If further questions arise, please let me know.

Regards,

_____________
Greg Freeland
Pegasus Imaging Corporation
http://www.pegasusimaging.com
support@jpg.com