When Area_Intersection is used with SpatialRelation, all features that partially or fully fall within the area of the filter are selected. Envelope_Intersection checks to see if the bounding box of the filter overlaps any bounding boxes of the features in the layer. A much quicker search results, but the features found could fall outside the area of the filter.

In general, it is recommended to use Area_Intersection to be certain you are retrieving the correct features. While processing time for Envelope_Intersection can be faster, it should only be used in customized environments where you plan to retrieve a subset of features on which to run a second query using Area_Intersection.

The default value is Area_Intersection.

When using ArcSDE layers, Area_Intersection should always be used for point and line layers. The reason is that all points and some lines do not have an associated envelope and hence cannot be used to query features using Envelope_Intersection.

Reference