If set to 3, LLB and iBoot will give debug output over serial while booting or while in Recovery Mode. This allows you to see things like the list of firmware images in flash and the information that it output whilst the LCD is initialized (ie. pre-"Recovery Mode" output).
Note that as a consequence, when set to 3, output over USB may be very choppy for reasons that have not yet been investigated.
As of iOS 9, the output appears as two hex strings: the first string is the filename, and the second is the line number. This means that in order to view the log output, the latest revision of the iBoot source is required.