Physics Time Warp = As one warps through time, the physical parameters are propagated as if time transpired normally. I.E. the physical properties change. For example: Attitude will continue to rotate, or electrical charge of a battery decrease or increase, and will continue through a time warp the same amount as they would in normal time.
Non-Physics Time Warp = Simply, the physicals parameters will not change during the Time Warp. I.E. Your initial physical conditions will stay constant. For example: Initial Attitude or the electrical charge of a battery will remain the same at the end of the Time Warp as they were at the the beginning. Only your relative location will change along your orbit path.
The first will add processing burden to accomplish since the propagator algorithm has to recalculate all the parameter values as each iteration step of the way. The second, reduces the processing amount since it only has to re-calculate the position change at the end of the Time Warp.
Hope that helps.
LeroyJenkins's post in What is the difference between a Physics Time Warp and a Non-Physics Time Warp? was marked as the answer