What is the purpose of Auto Position with Callout?
When selected, the label position setting for the region labels are ignored and callouts are generated if labels don't fit.
When is Auto Position with Callout active?
When a map layer is selected and labels are turned on.
How do I access Auto Position with Callout?
On the LABELS tab, in the Label Placement group, click Label Rules, and click Auto Position with Callout.