All the Prepare Asset explanation is related to the options that are set in Project > Properties > Prepare Asset dialog.
Temp Directory is the local folder into which the local copy will be saved.
Maximum Capacity is the space that this folder should not exceed.
Watch Folder for updates on retrieved files ensures that each time you press Save in the NLE application, Metus MAM will understand and pop up the dialog asking more details .
Delete files in Temp folder - if this option is checked , Lifetime (in days) presents the period for which the local copy will exist in the Temp Directory. To make this file be automatically deleted according to that Lifetime criterion , check this option.
If the archived file is not in a proper format for the NLE editing tool, you can transcode it during the retrieval process using either Metus MAM System or Carbon Coder. Thus, the local copy will be transcoded.
Please see Prepare Asset for detailed information.