2017 Re-Run. Yay
TL; DR
This parameter sets the default value (a) for the actual Link Library Dependecies for each project link. If every link to a project has LinkLibraryDependecies , then this is virtually pointless.
However, when adding a new default link (in VS2010 and 2015), the new <ProjectReference> element in the vcxproj file does not have a set set, therefore this parameter is important because it provides a default value for all newly added links if their value does not change.
(a): It really should be the same for all configurations (Debug / Release) and Platforms (Win32 / x64), or everything becomes very complicated.
Mountain Details
Hans pointed out that it seems to be doing nothing in VS2010 as such . However, this does not mean that it is not actually used by VS / MSBuild.
The bottom line is how this parameter is inserted into the vcxprj file and how the default settings work for the <ProjectReference> parameter in the msbuild file.
The setting in the Linker dialog box, as shown above, is inserted as:

<Project DefaultTargets="Build" ToolsVersion="4.0" xmlns="http://schemas.microsoft.com/developer/msbuild/2003"> ... <ItemDefinitionGroup> <ClCompile> ... </ClCompile> <Link> ... </Link> <ProjectReference> <LinkLibraryDependencies>This option is not used by VS 2010!</LinkLibraryDependencies> </ProjectReference> ... </ItemDefinitionGroup> </Project>
And although it seems to be somehow grouped together with the Link option, which just confuses you.
What this actually does in this vcxproj file (or when exiting the .props file): set the default Link Library Dependencies The value for each project dependency on the Frameworks and References section in the VS2010 VC settings dialog box is

- or in the VS2015 link subtree -

And this is relevant, because when you add a new link to the project, the default entry in your vcxproj file will look like this:
... <ItemGroup> <ProjectReference Include="..\W32DynLib1\W32DynLib1.vcxproj"> <Project>{96be134d-acb5-....-....-....bb6fe4a7}</Project> </ProjectReference> </ItemGroup>
You will notice that there is no sub element <LinkLibraryDependecies>true|false</..> : This means that a "global" setting will be used to set the default value.
If your global setting is false (or No ), the link to the project will not be in anything. If it is true , it will be referenced.
What else:
- If this parameter,
LinkLibraryDependency , is completely absent in your settings, it will default to true (from the Microsoft.Cpp[.Common].props in the MSBuild folder). - If you have
This is not used in your global setting, this will be interpreted as true. - If you have the value
False is the new truth! or perhaps No way in this parameter, it will also be interpreted as built.] - A warning will appear in the VS2015 GUI if it cannot interpret the line here:

- The VS2010 GUI will display False for ALL values except
false , although this is interpreted as true when building the project.
What is more:
It seems that when converting old solutions with vcproj files vcproj converter will take the old dependencies that were specified in sln and the value of the project parameter vcproj , and in fact set the LinkLibraryDependency for each ProjectReference it inserts into the new vcxproj - this is one of the reasons why I I thought it’s a dead option for so long - most of our projects have a conversion history related to VS2005.