These fields are used in two ways: for determining the pay for salaried employees, and sometimes for payments of daily leave types.
Firstly, for salaried staff they are used to determine a nominal hourly rate for a given salary. The annual salary is divided by 52 x days per week x hours per day to come up with an hourly rate. Then in each pay, the appropriate number of hours are recorded against the Salary pay line. So for salaried employees you should set both of these fields.
Secondly, they are sometimes used when an employee has a bereavement or alternate day, public holiday, or sick day (BAPS). If the 'relevant' pay for this day cannot be determined you need to use their average daily pay (see http://www.dol.govt.nz/er/holidaysandleave/payment-other.asp). FlexiTime needs to know the number of days in each pay to do this calculation. If you have a days per week, this will be recorded against each pay. If not, but you use timesheets, the days worked will be taken from these. If you have neither of these or you wish to overwrite the default value, you can enter the days directly into the pay in the header area when you edit the pay for an employee.
The other thing that Days per Week is used for is determining if a day is an Otherwise Working Day for an employee. If set to 5, then FlexiTime will assume that Monday through Friday are working days. For regular patterns that aren't Monday to Friday you can tick Show Days and enter the specific hours on each day.
When you add one of the BAPS types of leave into a pay, the employee's hours per day will be used to default the quantity. If the employee has a standard relevant daily pay, then setting hours per day will mean the pay line will default correctly.