“Projection” refers to the way that locations in the model are mapped onto your computer’s view screen.
Parallel projection (also called orthographic) is the traditional projection used in mechanical drawings. The model contents are mapped onto your screen along straight parallel rays running perpendicular to the screen. This has the advantage that scale is uniform for all surfaces that are parallel to the screen and parallel lines in the model are displayed as parallel on the screen. This is particularly important in static presentations where a viewer can’t orbit and pan around to investigate the model and can’t use interactive tools to measure things, instead having to rely on manual techniques such as laying a ruler on the image. However, it is an intentionally distorted view that doesn’t look “real”.
Perspective projection corresponds to how images are captured by a camera or when an artist paints a picture. It also corresponds more closely to how our eyes see the world, so it looks more “natural”. Contents of the model are projected to the view screen along rays emanating from the position of an imaginary camera or eye. As a result, parallel lines in the model converge to “vanishing points” instead of being parallel on the view. That sounds bad, but our visual system developed to cope with it because that’s close to how our eyes see. Due to the vanishing points, scale varies with distance from the camera. Without a computer-based app such as SketchUp, it is complicated and difficult to accurately compare the sizes of things in the view.
In the Web versions of SketchUp, the projection is managed within the Scenes tray at the right side of th screen, as is shown opened in your image. That choice of projection is based on which of the two box-like icons you click at upper left. The top one is perspective (which is selected in your image), and the lower one is parallel.