This feature has a big positive impact on SEO, so it is recommended to set it per your needs.
Update from previous versions won’t change any existing URLs settings. To change the URL structure, component settings have to be changed manually.
If you change the setting from displaying category only in advert's URL to displaying region too, the old URLs will work, but they will get the correct canonical link with new URL that includes the region. This way, SEO will not be impacted, and search engines will know that the correct new URL has its regions.
To change the URL rules, go to the Options -> SEO tab and scroll down to:
Ads URL examples