Well normalizing is when it tries to match the volume of each mp3 to eachother, this prevents some songs being really loud while the others are quiet. I've never heard of one using a slider but im guessing its just to what extent to you want to limit the volume of each track, some songs are made to be louder than others so that can give it some room for change.
So if I set it to 100%, then it will completely normalize all the songs to the same volume level? If it's set to 0%, then no normalization occurs? Is that right?
To normalize a file means to raise its volume so that the highest level sample in the file reaches a user defined level. Use this function to make sure you are fully utilizing the dynamic range available to you. Sound Forge also allows normalization to RMS power. This means that a scan will be done on the sound file and it will be raised in level so its RMS power will be equal to the normalization level. This is helpful for making multiple files perceptually as loud as each other.