Hi altomar,
This setting determines what Mode C or S aircraft are reported audibly by PilotAware and passed to your Nav or other display - based on
their altitude relative to your own.
So for example, if you set the Vertical Separation to +/- 500ft, you will
only be warned about Mode C or Mode S aircraft when they get to
within 500ft above or below your current level and at a horizontal range (relative not specific) set by your choice of ‘Mode C/S Horizontal Sensitivity’. Remember raw Mode C and Mode S transponders don’t report their horizontal position - just their altitude, in response to a Radar or TCAS interrogation (the position is worked out by the ATC Radar).
For more information, please refer to the full User Instructions on
https://pilotaware.com/documents Feel free to come back if anything still isn’t clear.
Best Regards
Peter