Hi Tabea,
With "on deformed geometry...", the resulting geometry of each deformation step is used as basis for the next step. In contrast, when "on deformed geometry..." is disabled, the original geometry is used as basis for each deformation step. "On deformed geometry..." can be understood as an iterative approach to consider nonlinear deformations. It must be used if new contacts occur and is useful for simulations where the geometry change is important.