It's asking if this was a distribution from an inherited IRA. A code 4 in box 7 indicates that it is a distribution from an inherited IRA (which should make it unnecessary for TurboTax to ask this question, but TurboTax asks anyway).
Note that a non-spouse beneficiary is not permitted to roll over a code 4 distribution, so if you indicate that it's an inherited IRA and you are not the spouse of the decedent, TurboTax will not allow you to report the distribution as having been rolled over (which is fine in this case since you apparently did not attempt to roll this distribution over).
