It is simple once you get to know it. It displays which posts have been replied to which posts. Say someone makes a post about their favourite food, and two people reply saying yes I agree or not. Then a third person can have the choice of whether to reply to the first, second or third post. Threaded mode will show which post they replied to.
It's an advanced method of posting on a forum. For another example, I am specificaly replying to your post about not understanding threaded mode. If you switch to threaded mode you will see my post is linked underneath your post.
Honestly, if you go through it step by step you will understand