This feature was changed in WordPress 3.5 already and was moved from Privacy to Settings -> Reading. You where in all propability using a very old WordPress version.
You now just have the option to discourage indexing by search engines
-
Checkbox ticked -> Search engines should not index your site, however this will not force search engines not to index the site
-
Checkbox unticked -> Search engines are allowed to index your site
So, in short, you don’t have anything to worry about, your site will be indexed by default when the discourage checkbox is unticked
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