This feature does not do what it says. All it does is hide recently opened files from the menu but it still saves them in a file called vlc-qt-interface.ini in the AppData\Roaming \VLC folder and if you re-enable the option all files opened whilst the box not to save them was ticked will show up. This is very poor programing - what is the point of telling users their file history will not be saved if it is saved and can easily be viewed by unticking a box ?
Somebody needs to change the behaviour so that it does what is says and the file history is not saved when the box is ticked.