The "Pickup Directory" Mail Provider Extension is intended for use in testing and development sites. Instead of sending emails, it generates .eml files which are stored in the specified directory. This allows you to inspect the emails that would have been sent without actually sending them.
The pickup directory mail provider is part of the SMTP Mail Provider Extension. In most Nucleus installations, it is installed by default.
Use the "Send Test" form at the bottom of the page to test your settings, then click "Save Changes".