Some TV's output a signal back into the scart via this pin. Because this is a cheapo scart cable the wire carrying this signal is not properly shielded and causes bleed into the video in. Hence the ghosting effect you see on the screen.
If it's a mega cheapo scart cable you may still find some ghosting, but it will be far far better than what you are seeing at the moment.
Once you snip the pin it simply makes the scart into a directional cable.