iResolution is just an edge enhancement filter.
The "i" part in the name implies, like Panasonic's other "i" features, that the camera automatically controls when, and how much, it should apply this feature. What you select is just the maximum amount by which it will do that - it doesn't mean the camera will use it for every shot. Instead it will intelligently decide when to use it.
The "Resolution" part in the name implies that it's designed to enhance the perceived "resolution" (eg, the resolvability) of your lens or the image as a whole - that is, compensating for any softening in the lens.
It is generally regarded as more useful than most edge enhancement filtering, due to its intelligence (it adjusts itself automatically) and that it's restrained: the effect is quite subtle.
Personally, I leave it off because if an image is softened a little by the lens I either don't mind, or I'm happy to compensate for that in post. But you may decide you like it left on all the time.
This dcresource review describes the feature more and shows examples. It's about a third of the way down and begins "The Intelligent Resolution feature ..."