So the OOTB Transfer functionality called "Reassign" activity, which does not take into consideration the Operator Availability.
As per Pega help, below is the details for the checkbox:
This check box affects only routing activities. This check box does not affect the ability of this user to log in, enter work items, or complete assignments already on the worklist. It does not prevent another operator or manager from transferring assignments to the worklist.
If selected and at runtime a router activity (with parameter CheckAvailability set to true) attempts to send an assignment to the worklist of this operator ID, the substitute operator if any is used instead. If no substitute is found, the router activity adds the assignment to the worklist of the manager of this operator's work group.
If this checkbox is Unchecked, but operator has entered dates he is out of the office, will he still receive push work during those dates he's out? No Substitute operator is listed, just the dates the operator is out of the office.