[Edit in light of @TDahl’s comment below]
Better than a millionth of an inch. [/End edit]
But points closer than about 1/1000 of an inch (0.001 inch) will get merged as SU is working, and treated as ‘the same point’.
It’s highly recommended to turn it off, and to save that setting in your commonly used templates.
The snapping you see when it is off is SU ‘inferencing’ to objects already in the drawing.
There’s a theoretical use for Length snapping, if you are just starting a new drawing, to create lines, rectangles, circles, or arcs that ‘snap’ to a multiple of your chosen snap precision. But that’s a rare use case for most people once past the very new user and new drawing.
Since it can override inference snaps, it may mean that your intended exact match to an existing endpoint, midpoint, circle or arc centre etc. that is NOT a whole number of snap lengths will ‘miss’ and introduce an unintended error. Once those sorts of errors start, they tend to compound and become harder and harder to fix without starting over.
PS. There was quite a long discussion of length snapping back in November.