When CCD Commander encounters an error it cannot recover from, it will attempt to park the mount and close the dome if these functions (Park Mount on Error and Close Dome on Error) are checked.
The Enable Software Watchdog enables a separate program that runs in a separate process than the main CCD Commander process. CCD Commander communicates with the watchdog program on a periodic basis. If something causes CCD Commander to stop functioning - where it no longer reports to the watchdog program, then the watchdog program will attempt to close the dome/roof and park the mount. This is to try and prevent a catastrophic problem caused by CCD Commander crashing or freezing. However, as this is still a software program running on the PC it is not immune from system wide PC crashes or freezing. The watchdog is an added layer of protection when using CCD Commander completely remote. In semi-remote configurations, the watchdog is normally not needed.