What does the setting for "Mac app store and identified developers" allow?

The option that describes the setting for "Mac App Store and identified developers" accurately allows users to install applications from both the Mac App Store and those from developers who have been recognized by Apple, which includes having a registered Developer ID. This setting ensures that while the system encourages users to install applications verified through the Mac App Store, it also permits the installation of apps from identified developers whose software is signed with a valid Developer ID, thus providing a layer of security through code signing. This helps to ensure that the apps are from sources that Apple has vetted to some extent, which mitigates risks associated with malware and unverified applications.

This is a balance between usability and security, as it allows for a wider range of software to be available to users while maintaining some level of trust in the sources of those applications.