Folder converted to branch?
branch, branching-and-merging, tfs
Solution
I'm not sure what you mean by "I don't consider the source a branch" the source folder by definition becomes a branch as soon as you create a branch from it. The target folder is also a branch which is a child of the source branch.
There are no disadvantages to enabling this. Regardless of whether you have this enabled or not the Source and Target will have a branching relationship and you will be able to merge changes between the 2 branches.
If you have this box enabled, as well as being able to merge between source and target you will also be able to use the branch visualisation tools in Visual Studio. These tools are usefull when you want to understand how your code will flow between branches and the merge relationships.
Problem
In TFS (We are using 2012) why is the default to convert your source folder to a branch? I really don't consider the source a branch. What, if any, advantages/disadvantages does this have?