Inherit System Notification Settings

When you choose Inherit System Notifications Setting, the application will look real time in the Inventory List and will take the setting "Default Notification Setting" as you have configured via the Groups Receives Notifications for this Agent you are working on

In above case you choose to Inherit, so if this item has an notification the appication will escalate following the 24for7Email Notification Template:

If you change the setting "Default Notification Setting" as you have configured via the Groups Receives Notifications it will have direct impact on this item. You will also see that the text next to "Inherit: " changes to the other "Default Notification Setting".