Native on: your receiver and TV will switch to the native resolution that the channel is broadcast on. Example: If you're watching ESPN, Fox, etc. it will be in 720p. If you're watching NBC, Discovery, etc it will be in 1080i. If you're watching an SD channel, the interface will be displayed SD, if you have 480i or p checked. When changing between channels of different resolution, it will take it an extra second or three to change and everything will go black during that time. Some will say that it produces a better picture, but that is very unlikely that they can actually see any difference. It is very unlikely that there even is a difference.
Native off: Everything is "upscaled" to 1080i and channel changes go smoother. That is the only difference. If you go to channel 125, 1117, or download something in 1080p, it still treats it like native is on and will switch to 1080p. Again, not that there is much, if any, of a difference. It's just easier to leave it off, I suppose unless you're a deep pureist, unless you've found something here with the judder......
As for the reduction of judder, I guess it's possible that you'd see it less with one vs. the other, but I don't know enough about that to know for sure. I wouldn't be surprised. I'll try it myself if that seems to happen for me.