If Display selection when necessary is set in Preferences -> Key Selection tab, a list of keys will pop up if there are addresses in the list of recipients for the message for whom you have no public key.
If Never display PGP key selection dialog is set in Preferences -> Key Selection tab, and there are addresses in the list of recipients for the message for whom you have no public key, the message will be sent unencrypted.
If you know the recipient(s) can read mail using the PGP/MIME format, you should use it.
This feature is dependent on the settings in Preferences -> PGP/MIME tab being set to Allow to use PGP/MIME or Always use PGP/MIME.
Further help is available on the Enigmail Help web page