"Direct Connection" means that ForeFlight Mobile will bypass the normal method of communicating with the GPS. This is helpful if the device shows as "connected" in System Settings but is not working in the app. When "Direct Connection" is used, the device name will show in the Accuracy instrument at the bottom of the Maps view.
The switch for managing "Direct Connection" is available when connected to the device. Use the Devices view in ForeFlight Mobile and tap the Bluetooth GPS to view its details and settings.
When "Direct Connection" is off, the GPS signal will be of the exact same quality/accuracy/frequency even though the Accuracy readout on the Maps view in ForeFlight Mobile may show a higher value. That higher value is simply due to reporting limits in iOS, and does not reflect that the accuracy is, in fact, much better.
The recommended setting is "Direct Connection" OFF whenever possible. That will maximize the speed and reliability of the app without compromising GPS fix quality in any way.