This select the type of cipher used to encrypt the data.
The first choice is "Caesar". This is a simple cipher where each character is shifted some number of characters within the alphabet. See !!!! for additional information. You get to specify how far each character is shifted.
The next choice is "Substitution". This is where each character of the alphabet is mapped onto another character within the alphabet.
In both cases you can choose to have multiple keys. If you have (for example) three keys, than the first one is used for the first character of the puzzle, the second for the second letter, etc. Once you run out of keys, the first one is used again. This makes the first challange of cipher constructed in this way to find out how many keys are in use, and then figuring out what the patterns are.