That option refers to the output of the search results.
On database level the content field is seen as “raw” text, so the query has no way of telling if is comparing the input to HTML or non-HTML content. This and many other factors make searching in WordPress very hard, generally speaking.
However, there is a secondary engine built in to the plugin, which requires a bit of configuration. What it does, is that it makes a separate database and pre-processes all the selected content, and tries to recognize words, but remove all other unneccessary content (like HTML tags, special characters etc..). Then puts these words to the database separately, with calculated relevance values based on occurences and such. It's not perfect of course, but it removes most of the unwanted content effectively. Please check the following sections of the documentation for more information on how to use it:
– Index table engine introduction
– Configuring and Generating the index table
– Enabling the index table engine
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