G7X II - RAW into Lightroom question

Yes it makes sense. Every Raw photo has a JPEG associated with it. If you are shooting raw only and you review the shot on the camera's LCD, you are looking at the RAW file's embedded/associated JPEG.

Preserving the camera settings means that your Tiff will look like the JPEG on your LCD, but it retains all the data (in this case 8 bit, not 16) and you can manipulate it just as with any raw file.

Think of it as the "starting point" for working on the raw file. When the camera JPEG settings are preserved, the starting point is a group of settings (f.e. saturation, contrast, etc.) just like the image on the LCD. So preserving the camera settings can be a big time saver as your starting point is already pretty close to where you want the photo to be. I don't see it as much on Canon but for Nikon RAW files it is so much faster for me to get the true Nikon colors by using Nikon software to keep those camera settings as the starting point (some poeple may use custom presets in lightroom or similar programs to achieve the same thing).

When you convert or import with a different program it will apply it's own settings so that the "starting point" probably won't look like the image on the LCD and sometimes can look really bland or sharpening will look different etc. (which is o.k. if that is what you want for a starting point). Have you ever opened a Raw file and it looked a certain way t first and then a moment later it looked different? That first image you see briefly is the JPEG that has the camera settings.

Another way to get the "starting point" closer to where you want the final product to be is that some programs like lightroom allow you to use presets so that it will automatically apply settings upon import so that the "starting point" looks a certain way based on the preferences you tell it (the preset).

Whether you want 16 or 8 bit or want to preserve EXIF info is personal preference. I do 16 bit because I want all the data but that means bigger files/poteniailly slower computer. You may never notice any difference between 8 and 16 bit depending on what you are doing such as heavily pulling shadows for example you might see a difference.

I would suggest trying a couple different options for those settings shown in the screenshot and see what you prefer.  And from then on you can just leave it at those settings.