Use hardware flow control and modem lines -- the only reason you would want to turn this option off is if you had a direct cable connection between two computers.
Escape control characters -- usually this option is negotiated automatically by the server, so it should be safe to leave it off.
Abort connection on well-known errors -- self-explanatory.
Allow any user to (de)activate the interface -- changes the file permissions on if-up and if-down so users do not have to be root to activate the link.
Line speed -- assuming 16550, UARTS should be set to 57600 for 14.4kbps modems and 115200 for 28.8kbps and up modems.
Modem port -- usually /dev/modem, on older Linux distributions it may be set to /dev/cua1 or /dev/cua2; on newer distributions it may be set to /dev/ttyS0 or /dev/ttyS1.
PPP options -- a place to put extra options for the pppd daemon that are not configured by Linuxconf. See the pppd man page for details.
Modem string -- consult your modem manual for the correct initialization string for your modem or leave it at the default ATZ.
Modem dial command -- ATDT for a touch-tone line, or ATDP for a pulse line.
Phone number -- the number for your ISP's modem pool.
Debug Connection -- I believe this is to add debug options to pppd daemon at startup.
These are the commands run by the chat script. It waits for the server to send text prompts and then returns other text. It usually returns a name and password, but sometimes configuration information as well.
Activate interface at boot time -- only useful if you have a leased-line or other permanent connection.
Set default route -- useful when connecting to the Internet! It will send packets to an unknown host through the PPP interface. It is important that you do not already have a default route set elsewhere, or this may not work.
Restart link when connection fails -- will try to redial if the connection is lost.
Time out value in seconds -- the interval of time after which PPP decides it will not connect and aborts.
Maximum packet size -- the better the line conditions and the bigger the package size, the faster they transmit. However, on noisy lines this will slow things down, because packets will occasionally have to be re-transmitted, and the bigger they are, the more has to be re-sent.
Infrequently used options -- local and remote IP addresses are usually assigned automatically. If you need to set them manually, your ISP will usually tell you.
PAP -- enter your ISP provided username and password here, if your ISP uses PAP.