The Preferences page is a confusing mishmash of options. Fortunately, except in seriously pathological circumstances, testing these options shouldn't cause you any great harm. Once you've set the options you like, clicking the Save Preferences button will save your preferences. None of your preferences take effect until you hit the Save button.
The Reset Preferences button will fill the fields on the page with the original values, in case you start messing around with them and forget what you actually had before.
Here's a brief description of each of the preferences on the Preferences page:
Quickbar settings. This defines where the list of utility links ("Quickbar") appears on Web pages. You can set it to the left or right, or leave it off entirely.
Skin. A skin is a collection of user-interface options that gives Wikitravel a particular look and feel. The default skin is Cologne Blue; you can choose one of the other skins to see if you like it better, but 5 drachmas says you won't.
Rendering math. Ignore this; it's an artifact from the Wikipedia software. Wikitravel doesn't support the fancy math rendering that Wikipedia does, so these settings won't work, anyways.
Date format. Defines how you want to see calendar dates formatted.
Textbox dimensions. Defines the height and width of the editing text box shown when you edit a page. Leave this at the defaults unless you have a really screwy browser.
Time offset. Determines what time offset to use when displaying edit times in the Page history page and elsewhere. Use the Fill in from browser button to set this, unless your browser doesn't know what time it is where you are.
Change Password. Change your user password. You have to enter your old password once, and your new password twice. Again, your password remains unchanged until you hit the Save button.
Show hoverbox over Wiki links. Whether or not to have a little floating window over links internal to Wikitravel with the "real" link destination.
Underline links. Show links in Wikitravel articles with underlines.
Format broken links. If an internal Wikitravel link points to an article that doesn't exist yet, this determines how that link appears. If set, it shows broken links with a specific color; if not, it shows broken links with a question mark.
Justify paragraphs. If set, paragraphs in Wikitravel articles will be formatted to avoid jagged line endings. If unset, the paragraphs will be formatted as-is.
Hide minor edits in recent changes. If set, changes that the contributor has marked as "minor" won't show up in the Recent Changes page or elsewhere.
Auto-number headings. If set, this option adds outline numbers to all the headings in an article.
Show links for editing individual sections. When this is set, each heading in an article will mark off a section that can be edited individually. This can be nice for editing long articles, but makes pages a little busier.
Show table of contents for articles with more than 3 headings. If there are more than three headings -- and, thus, three sections -- to an article, an automatic table of contents will be added to the top of the page.
Remember password across sessions. Whether or not to keep your authentication credentials around between sessions. This is useful if you use Wikitravel from your personal computer; if you use it from an Internet cafe or other public computer, keep this unset.
Edit box has full width. If set, the text area for editing pages will fill your browser window.
Edit pages on double click. This option allows you to edit a Wikitravel article by double-clicking on the article rather than clicking on the Edit this page link. It can be useful if you do a lot of skimming and editing; it can be a hassle if you're used to using double-click for text selection and copy-and-paste.
Add pages you edit to your watchlist. If this is set, by default the Watch this article checkbox on the editing page will be set.
Mark all edits minor by default. Defines whether or not to set the This is a minor edit checkbox on the editing page by default.
Show preview before edit box and not after it. After clicking the Show Preview button on the editing page, the article text will be shown before the text area containing the Wiki markup, not after it. A matter of preference.
Disable page caching. In general, leave this option off unless you are having problems seeing old versions of articles.
Disable e-mail from other users. This will turn off the E-mail this user link on your user page. Wikitravel:Administrators may, under extreme circumstances, still contact you through email.
Your nickname. For signatures in talk pages and elsewhere, a short nickname can be helpful. If you leave this blank, your full user name will be used in signatures.
Number of titles in recent changes. When using Recent Changes, this many article titles will be shown. Usually 50-100 is a good default.
Threshold for stub display. Your definition of how long an article has to be to be considered a stub. When this is set, links to stub articles appear in a different color.
Hits to show per page. Determines how many article titles are shown when you use the Search functionality. Leave this at the default value unless you're really concerned with Search functionality.
Lines to show per hit. How many lines of text to show on full-text search results. Leave this at the default value unless you're really concerned with Search functionality.
Characters of context per line. When showing full-text search results, how many characters to show in the line. Leave this at the default value unless you're really concerned with Search functionality.
Search in these namespaces by default. Which namespaces to search in by default. Usually, just searching the (Main) namespace is sufficient.