The Item Site Replacement settings screen allows you to configure a couple basic settings on how Item Site Replacements work.
You can access it by going to Admin --> System Configuration --> Replacements
Allow Divergent Replacements - This setting controls whether or not a diverging replacement, e.g. one part being replaced by more than one SKU, is allowed.
This is an uncommon scenario, but one example would be something like this: Say you have an old SKU, that is a dining set of 4 chairs and a table. However, for business reasons, you decide that after introducing a new version of this dining set, you will sell them individually, rather than as a single set. In this case, it would be appropriate to have one SKU being replaced by the two new ones.
Allow Part To Be New If It Replaces Something - When a new product is introduced, and linked via Part Replacement, most of the time you wouldn't want the new item specially classed as if it was new, since you have plenty of demand history to work with due to the replacement, so the new item can be classed normally. So, most of the time you will want this option disabled.