This decides whether the game calls your character “she/her” or “he/him”—but only when you have your pronoun setting on “Auto.”

• If you've set your pronouns to a specific choice (like always “he” or always “she”), the game just uses that. Simple as that—no guessing involved.
• But if you set your pronouns to “Auto,” the game tries to guess based on how feminine your character currently looks (your overall appearance level from crossdressing, hormones, etc.).
  • At most appearance levels, it's straightforward: look feminine enough, and the game calls you “she.” Otherwise, “he.”
  • When you're nude, though, it's a toss-up on looks alone—so the game breaks the tie using two extra details: how big your chest is, and how long your hair is. Bigger chest, or a medium chest paired with longer hair, tips it over to “she.” Otherwise, you're still “he” when nude / lewd.

In short: Auto mode means the game is constantly reading your character's body and looks to decide which pronoun fits best, rather than you locking it in yourself.