If you want people to be allowed to pay for their product when it is delivered or when they pick it up then you should tick yes, otherwise you should tick no.
You must set each product to payment on pickup/delivery on an individual basis via the add/edit product page, not via the payment methods page.
The customer is still allowed to select any other payment methods that you have set up i.e. PayPal or Google Checkout.
If your customers select to pay on pickup/delivery all other products in that order will expect to be paid for on pickup/delivery.