The way On Demand works is that on physical Pogoplugs, it will kick off a transcode as soon as you click a video to view it, but not before. When Always is set, transcodes are generated for all videos all the time -- regardless of whether or not you clicked to view it.

For your PC, all transcoding is done in real time, so videos will never be transcoded before clicking to view them. Essentially, this makes all videos you watch on your PC function as On Demand when you have Always set. That makes the additional option moot.