The unknown-clients flag is used to tell dhcpd whether or not to dynamically assign addresses to unknown clients. Dynamic address assignment to unknown clients is allowed by default. An unknown client is simply a client that has no host declaration.
The use of this option is now deprecated. If you are trying to restrict access on your network to known clients, you should use deny unknown-clients; inside of your address pool, as described under the heading ALLOW AND DENY WITHIN POOL DECLARATIONS.