From: http://en.community.dell.com/techcenter/storage/f/4466/t/19415894.aspx

  Hi, I'm Joe with Dell EqualLogic. Flow control is a method by which a receiver of Gigabit Ethernet traffic can briefly 
  "throttle back" the sender of the traffic to keep from get ting overwhelmed. To do this, the receiver sends a special Ethernet frame, 
  called a "pause frame", back to the sender; the sender then stops sending data for a short period of time. This allows the receiver to 
  process the packets it has buffered and to prepare for the next group. 

  If flow control is not available, and the receiving network device is not able to handle the rate of incoming traffic, then the only 
  alternative it has is to start discarding incoming packets that it cannot process. These packets will not be permanently lost, because 
  TCP/IP has mechanisms for detecting discarded or lost packets and retransmitting them. However, the detection and retransmission cycle 
  takes much longer than flow control (several seconds as opposed to several milliseconds), so you are likely to see performance degradation 
  if this happens frequently. 

  For this reason, EqualLogic strongly recommends that flow control be enabled on all switches, NICs and HBAs that carry iSCSI traffic.

  Hope this answers your question.

From: http://communities.intel.com/community/wired/blog/2012/01/13/go-with-the-flow-control

Flow control is a key part of keeping your 1 Gigabit and faster network running smoothly. Somewhere along the line some websites started telling people to turn off flow control so their network would go faster. In the short term this might be fine;

in the long term you’re going to see bigger problems and probably drop more packets than you’ll make up by being able to send as needed. The problem people would say is that Flow Control stops the traffic, and this costs performance. Absolutely it stops traffic. But it stops the traffic the receiver doesn’t have room for!

The flow control is like a stop light controlling access to the highway. Instead of letting them all in at once, when there is no room for them and gumming up the works even further, flow control gives protection to the receiver. This protection allows for long term speed and less dropped packets.