The “Automatic” format is usually our recommended option to stick with, hence it being the default! In a very general sense, file packages can offer better performance and disk conservation than flat files due to being a bundled file format, whereas flat files can be easier to work with when sending files over the internet. Most users shouldn’t have to worry about picking one versus the other, so the “Automatic” option will take out this guesswork and automatically switch between a package or flat file, to offer the best performance based on the characteristics of your document.
With the “Automatic” option selected, OmniGraffle documents will start off as a flat file until you place an image file onto your canvas, after which it’ll get saved as a file package. I hope this helps!