Order spawning streamlines order fulfillment by creating new orders for backorders (or for warehouses). Detailed below is the difference between the two methods along with setup information. Note that both of these settings can be used in conjunction.
Backorder spawn
The most popular of the two, backorder spawning happens at the time of Shipment Confirmation. All backordered quantities are canceled from the original order, and moved onto a brand new sales order. It's easy to keep track since each new order uses the original order number but ends with a cycle number (-01, -02, -03, etc), and the product detail contains a hyperlink to the newly spawned order.
The benefit here is that each order can be processed separately. If waiting for merchandise from a vendor, the Automatic Backorder Release can release the order spawn, even if the original order hasn't been invoiced yet.
This can be enabled with Company Master setting Spawn New S/O for B/O items after Shipment Confirmation.
Warehouse spawn
Used for when a single order is shipping from multiple warehouses. This occurs at the time the order is created. Each line item that is coming from an alternate warehouse gets cancelled from the original order, and moved onto a brand new sales order (one for each warehouse).
This is easier for order pickers as their order only contains the products they need to pick. Each warehouse can independently print, ship confirm, and route their own orders as they see fit.
This can be enabled with Company Master setting Spawn New S/O by Warehouse. You may want to set a Default Printer for each Warehouse (File > Company > Warehouse) to speed up order printing.