This policy setting controls whether Outlook is required to use FIPS-compliant algorithms when signing and encrypting messages. Outlook can run in a mode that complies with Federal Information Processing Standards (FIPS), a set of standards published by the National Institute of Standards and Technology (NIST) for use by non-military United States government agencies and by government contractors.
If you enable this policy setting, Outlook runs in a mode that complies with the FIPS 140-1 standard for cryptographic modules. This mode requires the use of the SHA-1 algorithm for signing and 3DES for encryption.
If you disable or do not configure this policy setting, Outlook does not run in FIPS-compliant mode. Organizations that do business with the United States government but do not run Outlook in FIPS-compliant mode risk violating the U.S. government's rules regarding the handling of sensitive information.
For more information about FIPS, see FIPS - General Information at http://www.itl.nist.gov/fipspubs/geninfo.htm