On the Material Types tab of the Nonconformity Types screen, you can define one or more material types for which the nonconformity type is relevant. For example, if the nonconformity type is wood rot or termite infestation then adding wood on this list is a clear choice. Adding a material like steel or iron, however, is not.
Once you add a Material Type on this tab immediately the selected nonconformity type of the header record will not be general any more. It will now only show as an option on the Nonconformities screen if one of the associated material types is selected there as well.