Devices such as AirPods have both speakers and microphones; they can be used for both audio output and audio input. With many such devices, macOS will normally use the SCO or SBC Bluetooth audio codec because this works with both output and input. It is a good choice if you are making a Skype call where you want to both listen and speak.
However, sometimes you may want to only listen, e.g. if you are playing music, watching a video, or playing a game. In this case, the SCO codec is not optimal because it has lower audio quality. A codec such AAC would provide better sounding audio, but it may not work with audio input. If you check the Improve sound quality by disabling audio input from device box, ToothFairy will tell macOS not to use the device’s microphone, which lets macOS use the higher quality codec that’s optimized for audio output.
It is still possible to do things that require audio input, e.g. starting a Skype call or talking to Siri. Depending on the app, macOS will either use the Mac’s internal microphone (e.g. Siri) or use the Bluetooth device’s microphone (e.g. FaceTime), automatically switching it to the lower quality SCO codec, overriding the change that ToothFairy made in System Settings. If this happens, when you’re done using the app, you can tell ToothFairy to disconnect and reconnect the device to switch it back to the high-quality AAC codec.
Note: Often, the audio quality can be improved by quitting the Xcode Simulator.
Note: You can download the Bluetooth Explorer app from Apple (as part of the “Additional Tools for Xcode 11”) to see and adjust codec settings for you devices.