These affect the accuracy of the physics simulation vs. the speed it runs. Linear uses less CPU, allowing for more objects, but has less realistic physics (such as some situations where you can kick things through walls, usually only when huge forces are involved). Adaptive is slower but has improved accuracy, and exact is basically for realistic simulations where accuracy is more important than speed. In games speed is much more important than accuracy, so I've set the default to linear - this is what the physics engine technical docs also recommends as the best for games.
Physics easily chews up a lot of CPU so definitely choose linear for games and try not to allow situations where unrealistic things can happen (such as giving objects ridiculously huge forces). It's a similar story for the friction model, adaptive is if you want your game to run fast, exact is for if you want it to be exactly true to the real world.
I'm not sure how much more complex the calculations are, but try a stress test and see how many objects you can create before you hit a certain framerate. I'm pretty sure you can create at least twice as many objects with Linear / Adaptive than with Exact / Exact.