Monitor Distance Scaling converts your mouse sensitivity across FOVs, such that targets at the same physical screen distance will feel the same to track.
Let's suppose you're fidding around with your in-game sensitivity, and you find a setting which feels just right as you're aiming and looking around. Naturally, you'd want to copy that sensitivity onto other games so you can get that same satisfaction. The naive way of doing it would be to copy your exact mouse sensitivity from one game to another: while you are technically getting 1-to-1 on camera angle to mouse movement, this ignores FOV differences (i.e. you are playing Call of Duty: Warzone at 112 FOV, while Fortnite has a fixed FOV of 80).
The problem with this approach is that the FOV difference matters in the feeling of the aiming itself. If you move the mouse the same distance in both games, the game with the higher FOV will feel comparatively slower, while the lower FOV game will feel faster. This may not sound like much, until you put it in extreme terms: say if your target game were around 40 FOV (zoomed in), that "1-to-1" will translate into rapid camera shakes, which isn't particularly useful if you're zoomed in, targeting things at a distance. Or if your new game were something extremely wide-angled like 140 FOV, then "1-to-1" means your aim will feel localized on a small section of your screen, which probably isn't what you want.
This is where monitor distance scaling comes in. By factoring in-game horizontal FOV, you will achieve the same feeling to your aim. This calculator exists so you don't have to download Aimlabs over Steam and have to load in to one of its targeting exercises every time you want to properly convert your mouse/aim sensitivity across games.