This drop-down field displays the lists available to be chosen for return by the web part. This includes all available lists, even if they have already been selected and are displayed in the "Currently Selected Lists" field. The format for the lists displayed here is "Site Name | List Name."
Click on a list to add it to your selection for the web part display. Click "Select All Sites & Lists" to include items from all of the available lists in the web part display.