As with the other doc question thread, this is a newer feature that was added to all Object nodes and behaves the same in all object nodes:
By default objects are Ray Traced in Terragen. Unfortunately the current Ray Tracing engine is not capable of rendering true displacement on objects, instead it renders a bump map, which is effective at distance or with smaller "displacements", but does not show edge detail or larger changes in object shape caused by more significant displacements. The old "micropoly" renderer IS, however, capable of displacing objects correctly, but it renders objects more slowly and with lower quality. This is why Ray Trace Objects is enabled by default.
The Force Displacement option tells the renderer to use the Micropoly rendering method for that one specific object, so you don't have to lose the benefit of Ray Traced Objects on all objects (by disabling it in the Render node) just to get displacement on one. That being said, Force Displacement should not be necessary for the Lake object.
We are working on doc updates and will include this.
- Oshyan