When this variable is set, Mutt will decode RFC-2047-encoded MIME parameters. You want to set this variable when mutt suggests you to save attachments to files named like this: =?iso-8859-1?Q?file=5F=E4=5F991116=2Ezip?=
When this variable is set interactively, the change doesn't have the desired effect before you have changed folders.
Note that this use of RFC 2047's encoding is explicitly, prohibited by the standard, but nevertheless encountered in the wild. Also note that setting this parameter will not have the effect that mutt generates this kind of encoding. Instead, mutt will unconditionally use the encoding specified in RFC 2231.