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In other words why is it there - what does it do, why would you want to check the checkbox?
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FLAC is available only for lossless source (DTS-MA , TrueHD , PCM). FLAC has higher compression and can be muxed into .mkv container. If FLAC is not checked than you get decompressed .wav. I did not add ability to mux .wav into .mkv because it does not make sense. If you want lossless audio you must use FLAC.