I know it has been nearly 12 years since you asked, but the answer is that "Toggle display of different trade groups" turns on and off color coding to show cities that are connected to each other in trade routes. Trade routes exist when cities are connected by roads, by rivers, and by coastlines. The cities and the connections will be displayed.
As you play, the likelihood is that you'll connect all of your cities into one trade group, but until you build the roads, your cities might be disconnected. If so, this toggle will show the disconnection. You can use this to look for weak spots or where a connection could be added or broken.