What it does
When call reporting is on, Google shows a forwarding number in place of your real number, on the ad or on your website, and routes callers through it to your actual line. The caller reaches you normally; Google records the call so it can be counted as a call conversion if it meets your minimum length.
Where it applies
Forwarding numbers back both call sources: the call button on a call asset or call-only ad, and the number on your website once the number-swap snippet is installed. Without a forwarding number in place, the call happens but Google never sees it, so Smart Bidding optimizes as if it did not exist. The consequences are worked through in a call from your ad is not a call from your website.