Videos settings referring for the embedded videos into the slider. This can come from Youtube, Vimeo or even self-hosted one.
The Automatically play videos parameter means, that the emdeded video will start when the layer where it is placed appear. By disabling this option, you will need to click on the play button manually, if you would like to see the video.
LayerSlider can Pause the slideshow while it is playing, or even pause the slider permanently.
With the last parameter you can set the quality of the Youtube preview. If a grey thumbnail image appear for the video, you need to decrease this value.