What does "Status in this column" mean in a column?

This is the status that backlog items and tasks will have when they are in this column. So, in other words, this specifies what kind of column this is.

The "Status in this column" option for an "In progress" column

In most cases, for the columns you add between the "To do" and "Done" columns, use the "In progress" status. You can also use the "To test" status for some of the columns, if you'd like to distinguish between actual work and test/approval activities.

You can have more than one column with status "To do" or "Done", if you'd like, to represent additional phases before or after the main work is done.

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