Thanks for clearing that up, Raze.
I always had it set to "on", so I have no idea what effect "off" had on the game. I checked other golden oldies, like BG, Planescape Torment, ToEE and IWD, and none of them has any setting affecting fog, well except ToEE and its fog-checks-per-frame slider. They do have various toggles though: gore, weather, always run, maximum hp, show tips, and so forth.
