Allow direct play / Allow direct streaming

Hi.
I have my Plex server running on my laptop. Laptop connected to the router by cable.
I have Plex player running on xbox x. Console connected with a cable to the router.

When I run a 720p movie and have it turned on:
Allow direct play - yes.
Allow direct streaming - yes.
Video/film cuts, becomes laggy and cannot be viewed.

When I have the following settings:
Allow indirect play - to NO.
Allow direct streaming - yes.
The movie is smooth and kind of nicer?

A request to explain to some non-technical someone why this is so?

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