A FXS (Foreign eXchange Subscriber interface) is responsible for giving telephony service to a FXO device (analog phone, FAX machine, Sangoma FXO interface) directly in the gateway.
When you plug a FXO device in the gateway, it will act as a Central OFFICE (CO). That means it will detect when the device goes OFF-HOOK/ON-HOOK, will be able to change the battery polarity, will make the device ring when a call is available.
This seciton of the configuration allows you to specify, for one or more FXS interface(s), the behaviour when a call got hung up by the FXO device, the channel is out of service, a call is received inbound or whether the hotline dialing mode will be enabled or not.