Existing contacts are not affected
This setting targets people outside your contact list; anyone already saved as a contact can generally still add you to a group as usual once you choose "My Contacts," so your everyday groups keep working normally.
This only blocks future invites, not groups you're already in
Changing this setting doesn't remove you from group chats you were added to before you changed it -- you still need to leave those individually if you want out.
Frequently Asked Questions
Will I still know when someone tries to add me?
Yes -- instead of being added directly, you get a private invite you can choose to accept, so you're not simply cut off from every new group.
Can I block a specific person from adding me without changing the setting for everyone?
The main "Groups" privacy setting applies broadly, but blocking a specific contact's number separately also prevents that person from adding you to a group.