If you choose HDR, it will force HDR even on SDR content and make some content looks a bit washed out. If you set to SDR, it will automatically match upwards if the content you’re playing are HDR/Dolby and switch back to SDR.
You can play with it and see which one you like better. I prefer SDR since I’m mostly on YouTube (less HDR content) and let it switch format when playing content on other apps. You’ll notice the screen gets brighter or darker (depends on your picture mode) when it auto switch on Dolby content.