If set and transaction is submitted by a holder, it indicates that the holder no longer wants to hold the MPToken, which will be deleted as a result. If the the holder's MPToken has non-zero balance while trying to set this flag, the transaction will fail. On the other hand, if set and transaction is submitted by an issuer, it would mean that the issuer wants to unauthorize the holder (only applicable for allow-listing), which would unset the lsfMPTAuthorized flag on the MPToken.
Transaction Flags for an MPTokenAuthorize Transaction.