Because the EOS 40D uses a sensor in the viewfinder to autofocus, autofocusing is not possible when you’re viewing a Live View image on the LCD screen. (The mirror is flipped up, and no image is available in the viewfinder.) This setting allows interrupting the Live View image long enough to allow autofocusing. Simply press the AF-ON button, and release it to return to Live View.
0: Disable. Live View is continuous, and focus must be achieved manually.
1: Enable. Pressing the AF-ON button flips the mirror back down so the 40D can autofocus. Releasing the AF-ON button returns to Live View.