"Send MIDI to DAW" sends the MIDI track, in real time, to a seperate VST instrument. So you could send a SuperMIDI track that you generated to, say, the Cakewalk TruePianos plugin, for example. That way, you aren't limited to using whatever tone generator BIAB uses.
If you want to use your own instrument directly from the BIAB plugin without having to import them into a track, this is a feature you'll want to turn on. It will stop generating audio in the BIAB channel, and send it as MIDI to your designated instrument.