This triggers a FIRM launch, where the title run by this FIRM is specified with the input titleID. The FIRM titleID-low is determined by the input application titleID. When the input TID is all-zero, the application is launched from the gamecard by the launched FIRM.

Flags bit0 is set when launching a FIRM which requires an application title-info structure to be specified via FIRM parameters. Otherwise when not specifying FIRM parameters, bit0 is clear. When flags bit1 is clear, NS will check certain Configuration Memory fields and will return an error if these checks fail. This Configuration Memory field checks seems to always pass on retail however.

See here for how the FIRM programID-low is determined.