If this is set to a value other than 0, then the daily service is run only during that hour.
For this to work correctly, the exception engine interval should be greater than 60 minutes.
By default, the interval is set to 70 minutes and the wake-up time to 1 (that is, 1:00 AM Server time).
So the notifications run once a day at 1:00 AM.
Also be aware that It is required that the resource you would want to notify are part of the project resources participants.
To answer the more general question you posed, of whether this means that notifications are sent when a milestone is reached or complete, please be aware of the following:
(See also the 9.1 PM user guide, chapter 6, page 116 or later versions of the same guide but different page)
Project managers can set up notifications for tasks within a work plan.
Project managers and summary task owners can edit these notifications from the Task Details page. Email messages can be sent to appropriate team members whenever a specific event occurs on a task. This would include such events as: