Go ahead and toggle the setting to “automatic”. This means VRR will work whenever possible, and most likely all the time, as is the case with VRR on Xbox consoles.
On this same screen, be sure to also enable “Apply to Unsupported Games”. What does this mean? In addition to now-standard VRR functionality, Sony occasionally builds VRR patches specific to popular games, intending to maximize their performance and playability. That said, VRR still functions to some degree on all PS5 games, including the “unsupported” ones.
If VRR is active and you are still experiencing screen tearing, please consult our screen tearing troubleshooters guide.