On consumer grade laptops what is the significance of “RAID ON” option in the firmware?

Assuming that the laptop uses an Intel chipset (and CPU), the "RAID" option does more than just RAID. It also enables other parts of Intel Rapid Storage Technology (IRST), especially Intel Smart Response Technology (ISRT, gotta love the abbreviations).

Smart Response Technology is a rather non-descriptive name for tiered storage, notably with SSDs and now possibly Optane. Around the time when SSDs were still quite expensive, it was common for mid-range laptops to come with a large HDD and a small (16-32 GB) mSATA SSD, with the SSD configured as a cache for the HDD. You could get very good performance approaching pure SSD with a lot more space and less cost.

But Smart Response Technology builds on top of Rapid Storage Technology, which is enabled by the "RAID" option in the firmware. So "RAID" is enabled, because it offers the ability to use SRT, and costs nothing extra over AHCI.

As a side note, some modern firmware now have an option for "Optane without RAID" - apparently this is because Optane caching is mutually exclusive with RST RAID.

AHCI and RAID are mutually exclusive in the BIOS, but not in operation.

In effect, enabling RAID also enables AHCI. In other words, you may see RAID as a superset of AHCI. In tests run by Dell, no performance difference was found between the two modes.

An important point is that it is very easy to convert an existing installation from RAID to AHCI, but the other direction is much harder.

I would suggest not to change this setting in the BIOS. If it is set to RAID, leave it this way. It is true that it doesn't add anything that you need, but it's not harmful in any way. Changing it may cause problems in the future.

References:

• Dell M.2 FAQ regarding AHCI vs RAID ON, Storage Drivers, M.2 Lanes, Performance and more
• AHCI VS RAID: Which One Should I Choose for Better Performance?
• Switching between AHCI and RAID on the Dell XPS 15