That flag determines Connor's overall focus so that the game will show dialogue that matches how you're playing. If you only choose sexual options, the game will decide you have a hookup focus. If you only choose romance, that'll be the focus. If you do a mix of the two, then you'll see a mix of inner thoughts and dialogue that match that.
The flag removal/replacement note is just showing that if you were previously assigned a hookup preference, making a new choice that's romantic will change it to a preference for both romance and hookups.
If you only make hookup choices, then that's the flag you have and that note won't be relevant to your playthrough. Even if you do gain the romance & hookup preference, how you "define" a character is taken into account first. So if you chose that you just want sex with Alex, that'll be what Connor focuses on when thinking about and talking to Alex.