The Options on the Create CD dialog are used to determine which albums or pictures to copy to the CD folder.
If you have too many pictures to fit on a single CD, or only want to copy a subset of your pictures to CD, then you will need to specify which Albums to copy. FotoAlbum does give a warning if the total size of all files exceeds 650MB.
If you choose the "All Albums and Pictures" option, then all pictures (including ones not in Albums), will be copied.
If you choose the "Selected Albums" option, then only pictures contained in those albums will be copied to the CD.
Program and Data Files Only is primarily used for advanced users who want to control precisely the pictures that will be copied. You must manually copy the pictures you want on your CD. The index file that is copied contains information about all pictures. However, you can copy only those pictures you want on your CD and FotoAlbum will run correctly from the CD.
The "Auto-run slideshow" option, then whenever someone inserts the CD, it will auto-run FotoAlbum and start the slideshow. If this option is unchecked, FotoAlbum will still auto-run and the user will be placed in the All view.