You should select items that are the farthest from the root of the directory tree; the Add to Source Control command for a file or directory also adds any parent directories (up to the VOB root directory) that are not already elements.
If you do not select this option, mastership of the main branch of the element is assigned to the replica that masters the main branch type. If the master replica is not your current replica, you cannot create any new versions on the branch. Also, if your config spec contains auto-make-branch rules, creation of the branches fails if the branch types are not mastered by your current replica.