The Separated Flow Areas (V1 p. 273) are typically used to prevent overland flow from flowing between cells that are separated by topographic features, such as dikes, that cannot be resolved within a the grid cell.
In many detailed models, surface drainage on flood plains and irrigation areas is highly controlled. The Separated Flow Areas option allows you to define these drainage control land features in the model.
If you define the separated flow areas along the intersection of the inner and outer boundary areas, MIKE SHE will keep all overland flow inside of the model - making the boundary a no-flow boundary for overland flow.
However, separated flow areas are not respected by the other hydrologic processes, such as the SZ drainage function. Thus, lateral flow out of the model may still occur via SZ drainage, SZ boundary conditions, MIKE Hydro River, irrigation control areas, etc. even when the separated flow areas are defined. Therefore, if you use separated flow areas, you should carefully evaluate your results, for example, by using the water balance tool, to make sure that the water flow is behaving as you expect.
Also, you should note that Overland flow cannot cross a river link. So, the cell faces with river links always define a separated flow boundary.