You might choose to use preferred layouts for dynamic display ads if your client:
wants to choose the layouts but not the features
doesn’t care if AdWords chooses the layouts and features
wants to choose the layouts and features
wants to choose the features but not the layouts
AdWords automatically pick from your preferred layouts. This option may make your dynamic ads even more effective by predicting the layouts that are likely to perform best for the people, placements, and platforms where they’ll show.
With preferred layouts, you’ll choose the layouts and features that you want. AdWords will only use layouts from this pool of preferred layouts (not available for retails feeds). Features of layouts include multiple product carousels, cropping your images to fit the ads, star ratings, and more. AdWords can predict the layouts that are likely to perform best for the people, placements, and platforms where they’ll show, making your dynamic ads even more effective.
Read more here: https://support.google.com/adwords/answer/3265299?hl=en