Think of the data flow like this:
End User —> Cloudflare —> Origin
In a reverse proxy scenario, there are two legs to address… End User to CF. (This is the “edge”.) A user’s request actually terminates there and CF handles this encryption.
But there is also the communication between CF and your server. (This is the “origin”.) If a request is not in cache or not allowed to be in cache (like for a logged in user), CF will have to retrieve it from origin.
In this case, your origin server is responsible for SSL. If you have a valid cert, and plan to keep a valid cert on the origin… you can use full encryption. It’s saying both legs of the trip MUST be properly encrypted. If not, throw an error.
Flexible SSL says only the communication between User to Edge must be encrypted fully (which CF takes care of) but that for the back half of the journey, you don’t HAVE to present a valid cert. You can but it’s not required. Cloudflare will ignore certificate warnings or if a cert if not presented.
The reason this setting exists is to help mitigate potential Man-In-The-Middle attacks. If you don’t have SSL enabled, something between you and the server (or something between CF and your server) could possibly read the request if it wanted to because it’s not encrypted.
For small gaming sites, this may not matter. But if you were handling sensitive financial transactions, you might want to ensure full encryption for the entire request flow instead of just one part of it.
So you don’t HAVE to use “Full” encryption. You have the option to do so since you have a valid certificate. If you however did not have a certificate at origin, you would get an error if you used “Full” since it would be impossible to fully encrypt the request flow on both segments.
Regarding the ORIGIN section of the SSL area, you can ignore it. It allows you to import your own self signed SSL certs or for you to use a CF provided origin cert at origin. (That cert is only trusted by CF, not regular browsers.) It’s only needed by those that actually sign their own SSL certificates instead of using ones issued by full certificates issuers (called Certificate Authorities or CA’s).