From FSL FEAT user guide:
Thresholding: After carrying out the initial statistical test, the resulting Z statistic image is then normally thresholded to show which voxels or clusters of voxels are activated at a particular significance level.
If Cluster thresholding is selected, a Z statistic threshold is used to define contiguous clusters. Then each cluster's estimated significance level (from GRF-theory) is compared with the cluster probability threshold. Significant clusters are then used to mask the original Z statistic image for later production of colour blobs. This method of thresholding is an alternative to Voxel-based correction, and is normally more sensitive to activation. You may well want to increase the cluster creation Z threshold if you have high levels of activation.
The FEAT web page report includes a table of cluster details, viewed by clicking on the relevant colour-overlay image. Note that cluster p-values are not given for contrasts where post-threshold contrast masking (see below) is applied, as there is not a sensible p-value associated with the new clusters formed after masking.
If Voxel thresholding is selected, GRF-theory-based maximum height thresholding is carried out, with thresholding at the level set, using one-tailed testing. This test is less overly-conservative than Bonferroni correction.
You can also choose to simply threshold the uncorrected Z statistic values, or apply no thresholding at all.
http://fsl.fmrib.ox.ac.uk/fsl/fslwiki/FEAT/UserGuide