In the event of a predictive failure alert, then this feature allows you to specify a command or batch file which will automatically be executed. SMARTMon will suspend itself while this action takes place. That is by design, so there will not be an issue where the program will continuously restart in each polling period.
If you click the Enable Auto launch Feature for testing, then this job will begin when you press the Test button on the main screen which will generate a false S.M.A.R.T. error. Use this feature to verify that everything is set up.
Typically you would use this feature to automate a program or batch file which may take additional actions, such as backing up your system. It is your responsibility to make sure that the auto launch program is properly defined and configured.