In absolute mode the position shown on the DRO is measured from the datum that you used at the start of your project. Incremental mode allows you to position the cutter from a secondary position (eg. from the hole which you have just drilled). DRO's allow you to have Incremental datums to allow you to measure from many secondary datums but allow you to always reference back to the main (absolute) datum that you used at the start.
A good explanation is shown on Youtube by Easson DRO's at
Paul.