Compare precision of sp, dp, and qp:

        x=1.234_sp, 1.234_dp, 1.234_qp
        1.23399997
        1.23399997
        1.23399997

        y=1.234_sp, 1.234_dp, 1.234_qp
        1.2339999675750732
        1.2340000000000000
        1.2340000000000000

        z=1.234_sp, 1.234_dp, 1.234_qp
        1.23399996757507324218750000000000000
        1.23399999999999998578914528479799628
        1.23399999999999999999999999999999991

        x=1.2345_sp, 1.2345_dp, 1.2345_qp
        1.23450005
        1.23450005
        1.23450005

        y=1.2345_sp, 1.2345_dp, 1.2345_qp
        1.2345000505447388
        1.2344999999999999
        1.2344999999999999

        z=1.2345_sp, 1.2345_dp, 1.2345_qp
        1.23450005054473876953125000000000000
        1.23449999999999993072208326339023188
        1.23450000000000000000000000000000009

        x=1.23456_sp, 1.23456_dp, 1.23456_qp
        1.23456001
        1.23456001
        1.23456001

        y=1.23456_sp, 1.23456_dp, 1.23456_qp
        1.2345600128173828
        1.2345600000000001
        1.2345600000000001

        z=1.23456_sp, 1.23456_dp, 1.23456_qp
        1.23456001281738281250000000000000000
        1.23456000000000010174971976084634662
        1.23456000000000000000000000000000005

    !    Compare precision of sp, dp, and d0:
    !
    !    x=1.234_sp, 1.234_dp, 1.234d0
    !    1.23399997
    !    1.23399997
    !    1.23399997
    !
    !    y=1.234_sp, 1.234_dp, 1.234d0
    !    1.2339999675750732
    !    1.2340000000000000
    !    1.2340000000000000
    !
    !    z=1.234_sp, 1.234_dp, 1.234d0
    !    1.23399996757507324218750000000000000
    !    1.23399999999999998578914528479799628
    !    1.23399999999999998578914528479799628
    !
    !    x=1.2345_sp, 1.2345_dp, 1.2345d0
    !    1.23450005
    !    1.23450005
    !    1.23450005
    !
    !    y=1.2345_sp, 1.2345_dp, 1.2345d0
    !    1.2345000505447388
    !    1.2344999999999999
    !    1.2344999999999999
    !
    !    z=1.2345_sp, 1.2345_dp, 1.2345d0
    !    1.23450005054473876953125000000000000
    !    1.23449999999999993072208326339023188
    !    1.23449999999999993072208326339023188
    !
    !    x=1.23456_sp, 1.23456_dp, 1.23456d0
    !    1.23456001
    !    1.23456001
    !    1.23456001
    !
    !    y=1.23456_sp, 1.23456_dp, 1.23456d0
    !    1.2345600128173828
    !    1.2345600000000001
    !    1.2345600000000001
    !
    !    z=1.23456_sp, 1.23456_dp, 1.23456d0
    !    1.23456001281738281250000000000000000
    !    1.23456000000000010174971976084634662
    !    1.23456000000000010174971976084634662

program helloworld
    implicit none

    integer, parameter :: p6  = selected_real_kind(6)   !---  4 bytes
    integer, parameter :: p15 = selected_real_kind(15)  !---  8 bytes
    integer, parameter :: p20 = selected_real_kind(20)  !--- 16 bytes

    !--- Symbolic names for kind types of reals:
    INTEGER, PARAMETER :: SP = KIND(1.0_p6)      !---  4 bytes
    INTEGER, PARAMETER :: DP = KIND(1.0_p15)     !---  8 bytes
    INTEGER, PARAMETER :: QP = KIND(1.0_p20)     !--- 16 bytes

    real(kind=SP):: x
    real(kind=DP):: y
    real(kind=QP):: z

    !---
    !--- Compare x_sp, x_dp, and xd0
    !---
    Print *, 'Compare precision of sp, dp, and d0:'
    !---
    !--- x=1.234
    !---
    Print *
    Print *, 'x=1.234_sp, 1.234_dp, 1.234d0'
    x = 1.234_sp
    Print *, x
    x = 1.234_dp
    Print *, x
    x = 1.234d0
    Print *, x
    Print *
    Print *, 'y=1.234_sp, 1.234_dp, 1.234d0'
    y = 1.234_sp
    Print *, y
    y = 1.234_dp
    Print *, y
    y = 1.234d0
    Print *, y
    Print *
    Print *, 'z=1.234_sp, 1.234_dp, 1.234d0'
    z = 1.234_sp
    Print *, z
    z = 1.234_dp
    Print *, z
    z = 1.234d0
    Print *, z
    !---
    !--- x=1.2345
    !---
    Print *
    Print *, 'x=1.2345_sp, 1.2345_dp, 1.2345d0'
    x = 1.2345_sp
    Print *, x
    x = 1.2345_dp
    Print *, x
    x = 1.2345d0
    Print *, x
    Print *
    Print *, 'y=1.2345_sp, 1.2345_dp, 1.2345d0'
    y = 1.2345_sp
    Print *, y
    y = 1.2345_dp
    Print *, y
    y = 1.2345d0
    Print *, y
    Print *
    Print *, 'z=1.2345_sp, 1.2345_dp, 1.2345d0'
    z = 1.2345_sp
    Print *, z
    z = 1.2345_dp
    Print *, z
    z = 1.2345d0
    Print *, z

    !---
    !--- x=1.23456
    !---
    Print *
    Print *, 'x=1.23456_sp, 1.23456_dp, 1.23456d0'
    x = 1.23456_sp
    Print *, x
    x = 1.23456_dp
    Print *, x
    x = 1.23456d0
    Print *, x
    Print *
    Print *, 'y=1.23456_sp, 1.23456_dp, 1.23456d0'
    y = 1.23456_sp
    Print *, y
    y = 1.23456_dp
    Print *, y
    y = 1.23456d0
    Print *, y
    Print *
    Print *, 'z=1.23456_sp, 1.23456_dp, 1.23456d0'
    z = 1.23456_sp
    Print *, z
    z = 1.23456_dp
    Print *, z
    z = 1.23456d0
    Print *, z
end program helloworld

program helloworld
implicit none

    real(kind=8)::x
    
    x = 1.234
    Print *, x
    
    x = 1.234d0
    Print *, x
    
end program helloworld

I get the following results:

   1.2339999675750732     
   1.2340000000000000  

So there is an advantage to using the 1.234d0 syntax if you're counting on accuracy in double precision. 

You're right, though, that using the -fdefault-real-8 does fix the issue illustrated above.  However, counting on a specific compiler's flag is not the best way to write portable code.  I would normally use that flag to handle older code that I (or someone else) had neglected to assign kind specifications where I wanted to try running in double precision.  There was also a time in the not-so-distant past that running in single precision was considerably faster, so you could work in single precision when developing and switch to double precision when you were confident that the long-running simulation was ready to go.

Yes, that checkbox just implements a compiler switch, -fdefault-real-8 to be exact.  It will promote all REAL declarations that are not explicitly defined with a kind to be REAL(KIND=8).  You can read more about it at http://simplyfortran.com/docs/compiler/ … tions.html.