This policy setting prevents the system from conducting a comprehensive search of the target drive to resolve a shortcut.
If you enable this policy setting, the system does not conduct the final drive search. It just displays a message explaining that the file is not found.
If you disable or do not configure this policy setting, by default, when the system cannot find the target file for a shortcut (.lnk), it searches all paths associated with the shortcut. If the target file is located on an NTFS partition, the system then uses the target's file ID to find a path. If the resulting path is not correct, it conducts a comprehensive search of the target drive in an attempt to find the file.
Note: This policy setting only applies to target files on NTFS partitions. FAT partitions do not have this ID tracking and search capability.
Also, see the "Do not track Shell shortcuts during roaming" and the "Do not use the tracking-based method when resolving shell shortcuts" policy settings.