The connection environment is the Salesforce environment being connected to.
For the Salesforce environment to connect to, there are two types you can choose from: either "Production Environment" or "Sandbox".
1. Production Environment
The organization you are actually using in Salesforce.
Sandbox is an organization that is a copy of the status of the production environment.
As Sandbox is separated from the production environment, any operations or settings done in Sandbox will not affect the production environment.