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This is where you set which lights should affect this surface, and how. As you can see above, you can globally turn the Diffuse and Specular on and off for each Light Master, or you can turn them on and off for each individual light. This is all on a per-surface basis, in other words, each surface can have its own light settings. Also, while the image above shows only one Light Master and three Lights, you can actually have as many of each as you want.
Note: Lights that are in a Render Group with objects will only light those objects, so if a light is in this list but is not in the Render Group with the object, you can ignore it. Lights that are in the root will affect everything.