This specifies the orientation of the electric field polarization. TE is when the electric field is parallel to the layers, and TM is when the magnetic field is parallel to the layers. Normal incidence is TEM. Therefore, this parameter has no effect for normal incidence.
Selecting "Both" will generate results for TE and TM separately. "Unpolarized" is a linear average of TE and TM. The first incident angle is used in this calculation, so to be meaningful, the first incident angle should be nonzero.