It's the EXTVID bit(VDP register 0, bit 0), meant for overlaying the VDP output on another image.
If it's unconnected, the result glitchy effect probably differs per MSX model (maybe even differs per tv?). IIRC on my MSX I got a fuzzy monochrome image when I set it.
I think one of the old french MSX magazines (can't remember which one) had a small article about this "feature", mentioning an alternate color palette available.
There was no explanation and it didn't work on my MSX but I guess this is where the "common knowledge" bit comes from.
