First thing to note is that Photo proofing feature works only if albums is setup in bricks mode. If you want use Tags in your album then you can safely do it, as both filters(from tags and from photo proofing) works fine together.
Remember to password protect album.
How to activate it
Generally you setup your album as usual and explanation is only needed for Photo Proofing group of options.
By enabling photo proofing feature your clients will see options for this album to select, comment and filter items on this criteria.
Configuring IDs of items
Second thing to decide is should your albums use manual or auto IDs.
IDs are useful to talk with client about particular photo/video and to refer it in your private repository.
If you choose auto then it will use IDs of each photo and video that come directly from WordPress. In case of YouTube or Vimeo videos you will have to add ID manually.
If you choose manual then you will have to add ID for each item in its options. See below image.