What does USE ANSI nulls, padding and warnings do?

This option affects TDS agent & Lite Driver connections to MS SQLServer databases. Sybase connectivity is not affected.

When enabled, the agent issues following Transact-SQL commands at connect time:

SET ANSI_ NULL_ DFLT_ ON ON

When disabled, the agent issues the commands:

SET ANSI_NULLS OFF
SET ANSI_PADDING OFF
SET ANSI_WARNINGS OFF
SET CONCAT_ NULL_ YIELDS_ NULL OFF

Refer to the MS SQLServer Transact-SQL Reference @ http://msdn.microsoft.com/library/default.asp?url=/library/en-us/tsqlref/ts_tsqlcon_6lyk.asp for additional information.