The "word verification" option can be found on the Settings | Posts and comments section in your blog.
If you choose "yes" for this setting, then people leaving comments on your blog will be required to complete a word verification step, similar to the one presented when you create a blog:
Adding this option prevents automated systems from posting comments to your blog, since it takes a human being to read the word and pass this step. If you've ever received a comment that looked like an advertisement or a random link to an unrelated site, then you've encountered comment spam. A lot of comment spam is made automatically by software which can't pass the word verification step, so enabling word verification is a good way to prevent unwanted comments.