In "System Settings / Desktop Effects" there is a checkbox for "Improved Window Management".

Can someone tell me what that thing does?

From a user perspective, I think the setting is poorly named - the name of it gives me no information at all, unlike something like "Animation speed" where it's pretty clear what it will do. And moreover, it seems rather silly to phrase it like that: if it's an improvement, why would I NOT want it? "Do you want the awesome stuff all the cool people use, or the sucky slow annoying window management?"

So I'm wondering what this actually does. I tried to google around for it but didn't come up with much information, just a few pages where someone mentions it in another context without explaining it.

Also I'd suggest renaming it in future versions to reflect more what it's behavior really is.

As far as I know it has to do with the effects in the "All Effects" tab, this is a simple setting to enable/disable some effects that "improve" window management. However, I don't know the details either, and I agree that it could be clearer. (Personally I dislike checkboxes that can be in a half-checked-half-not-checked state. Although this doesn't show up as such, it's not clear to me what would happen if I e.g. uncheck it.)

I found out the "improvement" is to make pull-down menus unusable, and automatically maximize all windows so you can't move or resize them. Once I turned it off and logged out/in, KDE became usable. I am running Kubuntu 12.04 LTS.

the checkbox enables "presentwindows", "desktopgrid" & "dialogparent"
whatever you might have experienced there is certainly unrelated - in doubt the window manager crashed (but that actually should not have major impact on "pulldown" menus (popups, comboboxes?)