Compute Terrain is like computing the normals of the terrain. It allows things to conform more accurately to terrain geometry, such as lateral displacement or surface layer constraints. If you're up close to the ground, and small rocks and displacements, you'll want a smaller patch size. If your terrain is distant, you could get away with larger patch sizes, and simultaneously quicker renders in some cases.
Take a look at these examples I've provided. First shows how a patch size of 20 will provide inaccurate height limit results (right side) while the left side is more accurate to terrain height with patch size of 1.
The next example shows the difference of lateral displacement at a small scale.