specifically, In the Lobby, you are selecting to DISABLE THE AUTO EJECT to simulate conditions that ejecting the pilot would automatically KILL or otherwise remove the pilot from the game, due to either weather conditions options selected (also in the lobby) that exclude Infantry i.e. extremely high or low temperatures, Tornadoes, etc. Also to simulate environmental conditions the game does not create such as caustic or otherwise NON-BREATHABLE atmospheres (besides Vacuum).
otherwise, if unchecked, auto eject occurs normally in circumstances that require it to happen. Like when mechs blow up BIG from ammo crits or reactor-goes-boom on a roll of 10+...
