Hubert 'depesz' Lubaczewski already wrote a clear blog entry explaining the effect of enabling standard_conforming_strings in Postgres 9.1. My blog entry explains why it will be changed in Postgres 9.1.
To understand standard_conforming_strings, you have to know some Postgres history. Postgres is written in the C language, and some C syntax was added to Postgres for convenience. For example, Postgres supports the C syntax for not-equal, != , as well as the SQL-standard non-equal syntax, <>. This is a good addition of C syntax because it does not affect SQL-standard-compliant behavior.