In Assassin’s Creed Shadows, Canon Mode is an optional feature that is designed to make the story more streamlined by having the game select the appropriate responses to the various dialogue options that are available in Assassin’s Creed Shadows.
This way there are no alternative story paths and the player does not make the choices. In this regard, the game provides fans with a more linear and more cinematic experience of the story that was intended by the developers.
So basically, it takes the choice out of everything you do. In some cases, you will end up sparing some of the assassination targets.
Here is an example from the Twisted tree:

The yellow targets were spared as part of the canon mode.
Most quests can be played as either Naoe or Yasuke irrespective of the mode chosen to play in but some quests are locked into one character.
The basic aspects of the game such as the combat, stealth, and the navigation are pretty much the same for both the versions of the game.
All the dialogue options are disabled, which results in a smooth flow of the story when it comes to the conversations.
The game proceeds through a specific order of events, which makes it the authentic version of the events as created by Ubisoft.
It is not possible to develop romantic relationships as the required dialogue options are missing.
Some companions cannot be hired because the conditions for their availability are also set in this manner, and the developer has already provided for this in Canon Mode.
Once the Canon Mode is turned on at the beginning of the game, it remains active for the entire playthrough.
Note: Once canon mode is on there is no way to turn it off and vice versa.
Should You Turn on Canon Mode
If you want to play the canon story of Assassin’s Creed Shadows, then yes keep it on but if you want more control of who you spare, kill, and what dialogues choices are made then keep this mode off.