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when set, a key and a scale pattern (eg. G Major), the MIDI editor (piano-roll) will only allow the entry of note events that "fit" on the selected key/scale. you may think of it as a snap-to-scale mode of note entry.

alternatively you also have this (menu) Tools/Quantize.../Scale command option, where selected note events will get vertically quantized or "re-fitted" to the given key/scale mode.

hth.
cheers