Recovery scenarios are useful if your tests could be interrupted by pop windows or application lock-ups, script code failure, etc. They are good when you know something could happen, but aren't exactly sure when it could happen. A Recovery Scenario instructs QTP/UFT to watch for one or more events that you've configured using the Recovery Scenario Wizard and if one of those events is 'triggered', UFT/QTP will invoke that scenario and look for how to handle the interruption and recover script execution again if needed.

For instance, let's say that you are doing browser testing and a warning pop-up appears informing you that the credentials are expired or that a print job is done. Normally, that pop up window would steal focus away from the application and QTP would timeout. You can have QTP watch for that pop up window and if it finds it, it will close it and continue on without losing your whole test run.

Take a look at the section in the user's guide regarding how to configure it. It's not too difficult.