An empty grade is a grade which is missing from the Moodle Gradebook. It may be from an assignment submission which has not yet been graded or from a quiz which has not yet been attempted etc. The Aggregate Only Non-empty Grades setting determines whether empty grades are not included in the aggregation or are counted as minimal grades, for example 0 for an assignment graded between 0 and 100.
If you choose to aggregate only non-empty grades, then a student's mark would represent his mark based on only what he has completed, so far. Otherwise, the mark is based on the total possible mark, including what has not yet been completed or attempted.
Here's a very simple example:
There are four tests, worth 25% each. Ming has completed the first two, and scored 100% on both, but has not yet attempted the third and fourth.
With Aggregate only non-empty grades enabled (i.e., checked): Since the third and fourth tests have not yet been attempted, they hold empty grades. Using only the non-empty grades, Ming has a grade of 100% (25/25 and 25/25 = 50/50 = 100%).
With Aggregate only non-empty grades DISabled (i.e., UNchecked): All four tests are used in the calculation, so Ming's grade, so far, is 50% (25/25 + 25/25 + 0/25 +0/25 = 50/100 = 50%).
Note that an empty grade and a zero grade are not the same thing. If the course reaches the end and Mind has never completed the 3rd test, you would need to decide how to treat that situation. You could leave it empty, or you could give him a zero grade.
If you have any questions about this setting, please contact eLearning Support by submitting a help ticket.