Basically just where you want to start viewing the file listings. For a web site you might have:
Server: ftp.mydomain.com
Initial Path: /public_html (which is the normal name for your home directory on the web server -- you can add a trailing "/" if you want)
Or you could start in a subdirectory:
Initial Path: /public_html/main
Here's an example for an sftp connection to a data storage area:
Server: server.some.where.org
Initial Path: /var/local/mydata
I suggest you start with Initial Path empty and then see where you get connected to, and where you want to go by default.