Normally when an object is connected to a simulator it reacts to gravity the moment the simulation begins.
Active on animated example
When an object has its Active attribute turned off it will not react to gravity. Even at collision time the fragments will generate but not react dynamically and the colliding object will simply bounce off.
Active off animated example
Setting this attribute to "all fragments" will cause all the generated fragments to react dynamically upon collision.
all fragments animated example
The third option, localized, applies to a connected node that has a localized paint map applied to it.
localized animated example
A common mistake that is made is to set a node with a node with a localized paint map to "all fragments". This causes the entire mesh, not just the localized geometry, to react upon a collision event. In the animated example below you will see that the entire mesh begins to fall once the collision happens.
localized mesh with Active on break set to all fragments animated example
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