My understanding of the DCS IPD (poorly named IMO) is as explained by SkateZilla below:
Physical IPD on the HMD Does this, AKA Focal IPD, Adjusting the IPD of the Lenses to Match your Eyes for clarity and reducing eye strain.
Rendering IPD changes the IPD between the rendering viewports within the engine itself., thus adjusting scale.
Matching the Rendering IPD to the Focal/HMD's IPD will make every Appear 1:1,
Closing Rendering IPD will make objects seem larger, Opening Rendering IPD will make objects seem smaller..
Basically, you're scaling your head size, smaller Virtual IPD will shrink your head, making everything seem huge, larger VIPD will make your grow your head, making everything seem small.