I
think that determines how large the 'default' processing area is on the waveletting tab. In other words, you know how when you change a wavelette setting or brightness, gamma etc and not all of the image changes? I think the processing size just determines how large this area is. In theory it would be best to set a large size when working on an AVI of the moon but set a small size when working on a planetary shot when only a small amount of the actual image is used. (All it should affect is the speed it takes Registax to make the waveletting change in the chosen area, it wouldn't affect image quality).
Then again, I could be wrong