Exporting the observations will export all the individuals and locations which are referenced by the observations in the filter. This is normally what is required for a standard export and I expect what you need.

If you choose the bounding box option you might wish to include all the Location which fall within the bounding box even if they are not used on an observation. This is where the Location tick box comes in as ticking this will export all Locations within the boundary even if they are not used .  Similarly, ticking the individual/organisation box  will  export all the individuals/orgs  and not just those referenced. These boxes would mainly be of use where data is being provided to set up a new Recorder system, so that the basic Location and Individuals  data can be shared without the Observation data.