When Shairport Sync is running as a daemon, it writes its process ID (PID) to a file. The file must be stored in part of the file system that is writable. Most build systems choose an appropriate 'local state directory' location automatically, but some, notably buildroot, don't always get it right for an embedded system. This compilation option allows you to specify the local state directory. Supersedes 2.1.4, which tried to do the same thing.
[Update] This has been superseded. Do not use.