You can lookup each of the set statements in Books on Line to get full definitions
Sets the connection to use ANSI standard NULL handling. This basically means that you cannot use
Where x = NULL
you need to use Where X Is Null
Means that you use single quotes to delimit strings and double quotes are used for object names.
SET ANSI_PADDING ON, what this do?
Means that varchar columns keep trailing blanks when stored in the database
This is the filegroup that the object will be created on. Lookup up CREATE TABLE in BOL for more details.
All of the SET options are the recommend way to run SQL Server. The performance affect of CREATE object ON filegroup depends on the configuration of your server. You can potentially get better performance by having multiple filegroups especially if the filegroups are on different physical drives.