Rear dropout spacing is the distance between the inner faces of the rear dropouts. Because this distance must match the Over-Lock-Nut distance of the hub, this value is actually entered in the Wheels dialog box, not in the dropouts dialog box.
If you select the custom option, you'll be able to enter any spacing you like. Alternatively, you can select MTB, Road or Track to assign standard dropout spacing for any of these styles of bicycles.