Grant Access Using Hierarchies on custom objects
Key Takeaway
You can deselect "Grant Access Using Hierarchies" only for custom objects. When it's off, managers lose the automatic access the role hierarchy gave them to their subordinates' records, unless they get access another way, such as a direct share or a View All or Modify All permission.
Grant Access Using Hierarchies is the sharing setting that lets users higher in the role hierarchy automatically reach records owned by or shared with users below them. You can't change it for any standard object. Most standard objects have it enabled, though not all. For a custom object, an administrator can turn it off, so Salesforce ignores the hierarchy when it decides who can see that object's records. The setting matters because turning it off changes what managers can view and edit, what their reports return and who gains access through group, queue, role and territory sharing.
How the role hierarchy opens access
The role hierarchy opens up access vertically. Users in higher roles get access to records their subordinates own. They also get access to records shared with those subordinates through sharing rules, manual sharing or other features. Grant Access Using Hierarchies decides whether that automatic upward access applies to an object's records.
Your org has a custom object called Site Inspection. The Regional Supervisor role sits above the Field Inspector role. Priya holds the Field Inspector role and owns 40 inspection records. A sharing rule also shares the Riverside district's inspections with the Field Inspector role. With Grant Access Using Hierarchies selected, Marcus, who holds the Regional Supervisor role, can access Priya's 40 records and the Riverside inspections. Nobody had to create a sharing rule for Marcus.