http://ez.no/doc/ez_publish/technical_manual/4_0/reference/datatypes/object_relations:
In addition to allowing relations to existing objects, this datatype makes it possible to create new objects and automatically relate them to the one that is being edited. Note that this currently works with all selection methods except the "Browse" method. In order to use this feature, you need to specify which type of object that should be created and where the newly created objects should be placed. This can be done by making use of the "Object class" dropdown list in the "New objects" section and the "Default location" section. If the "Object class" dropdown is set to "none", it will not be possible to create new objects from within the object edit interface.

A bit earlier in the text there's this paragraph:
The "Type" dropdown list is no longer in use. It is only available if the backwards compatibility mode is enabled. This is controlled by the "AdvancedObjectRelationList" setting located in the "[BackwardCompatibilitySettings]" section of the "settings/site.ini" configuration file or an override. Due to some problems with the old implementation, this setting is disabled by default. This documentation page provides the description of the datatype assuming that the "AdvancedObjectRelationList" setting is disabled.

In case AdvancedObjectRelationList in the [BackwardCompatibilitySettings] group is not enabled, creating new objects will also not be allowed by the datatype. These two are connected. No idea why the "New objects" fieldset is actually available when the setting is not enabled, because it has no use at all in this case.