Selecting this option does NOT allow guests to invite other guests. Only the first option, Anyone in the organization can invite guest users including guests and non-admins (most inclusive), allows that. Refer to the official documentation for more details, including how the invitation process works: https://learn.microsoft.com/en-us/entra/external-id/external-collaboration-settings-configure
Do note that those settings are not specific to Teams, there are many other methods which can be used to invite guests. A guest added to another tenant can for example access the Entra ID portal and use the Invite external user functionality therein, if allowed by the tenant's configuration.