in my camera, I have an option to "discharge batter" what does that mean?

Drain the battery completely dead.

With rechargeables its usually best to drain the battery all the way before you recharge it. So that feature helps you drain the battery so You can easily recharge it.

Rechargeable batteries have a certain life and number of times they can be recharged. If the batteries are charged many times without they being "fully or nearly fully discharged", the life of the batteries reduces. So, it is advisable to charge a battery only when it is fully discharged. However, that may not always be best for the user -> lets say you know at the end of day, your battery is 75% discharged. IF you are going out the next day, you dont want to have only 25% battery, so you charge it fully that night. In such cases, it will be better for the bettery life to "discharge the battery fully (remaining 25%)" and then charge it ffrom scratch. Hence this option in your cameras (some chargers have this option too).