The “Ignore Case” option can be used to ignore the case of filenames in the directory comparison.
It decides whether ReadMe.txt and readme.txt count
as the same file. Windows itself does not distinguish the two, so the option
matters mainly when one side comes from a case-sensitive origin — an
archive packed on Linux, a network share, or a
source tree checked out from a version control system. With the option off,
such a pair is listed as different although the contents may well be
identical.
This applies to the comparison of names, not to the file contents; for text files, see Case Insensitive Compare.