What is Spending Behavior and how is it set? 

Spending behavior is the as-if return rate used in your plan that determines how much you spend, save, and withdraw each year. Since you don't know on January 1 what return rate you'll have by the end of the year, you must choose an "as if" return in order to guide this spending. If you choose a high rate of return, you are spending aggressively. If you choose a low rate of return, you are spending cautiously. In the Full Risk investing (Monte Carlo), the spending behavior is determined by whatever your return rates are in the base plan. If you want to change the spending behavior, change the base plan return rate assumptions before running the Monte Carlo report. Or, you can create an Alternative Profile and change the return rates there and compare the two plans using the same investment strategies but different return rates. 

Does using a cautious return rate mean that you will leave upside market returns unspent, "on the table," so to speak? 

Setting your spending behavior at say 3% even though you might expect, on average, a 6% return based on the historical performance of your asset classes does not mean you will leave that 6% on the table unspent. It does mean that you approach each current year cautiously as you face unknown markets. Using 3% in this example is a way to hedge your bet (not count your historical-return chickens before they hatch). If it turns out you do get the 6% that year, the surplus you have that year (remember, you spent cautiously as if you will be earning only getting 3% that year) will be rolled into next year's balances when you update and, all things being equal, your new annual spending level for the future will be higher than the year before. Using this approach, you take your market upside one year at at time, only as it comes instead of assuming the historical average will show up each and every year perfectly on schedule. 

See also: Two Approaches and Two Purposes to Planning (why be so cautious?)

What is the practical advantage of cautious spending behavior?  

If this pattern of cautious spending behavior coupled with expected or better than expected historical returns continues, your annual living standard will rise year over year and your lifetime spending charts will tip upward through time from left to right. On the other hand, if you set spending behavior too aggressively, even though your 6% expectation eventually comes to pass over the life of your plan, but only after years of a bad sequence of returns, then you could get out over your skis and see the charts tipping downward as your aggressive spending effectively outpaces or over spends your actual returns. 

A good rule of thumb is that if you invest aggressively and expect higher historical but more risky returns, you should set spending behavior to be cautious; if you invest conservatively and expect lower, safer, historical returns, you can spend more aggressively. 

This trajectory chart below shows the effect of a cautious spending behavior where all of the trajectories tend to have an upward trend.