» Sat May 19, 2012 1:05 pm
Like peber said, specular lighting/distance controls how far away you can see objects shine. However, this really only comes into play outdoors. In a shop, everything is close enough so that changing the setting won't make a difference. However, if you go into the wilderness and drop a shield, sword or anything else that shines and then walk a distance away from it, playing the slider will dictate how far away you can see the shine of objects.
To answer your question OP, the effect on performance is so small that it usually never takes more than a few FPS (in the worst scenario). The effect isn't obvious, however is just one of those things that adds a nice touch. Keep in mind that if you modify the game to display buildings/objects further on the landscape (using a mod or .INI tweak), this will begin to slow down performance because there are more distant objects that will be shining.
In terms of light distance, I'm not 100% what it does (peber sounds right for that as well), however if it does increase the distance at which you can see light sources this would be a much larger drain on resources. Try putting specular distance at the max, it shouldn't hurt performance much at all. Play with light distance during the night and see what happens.