Any product you acquire / produce only sell to your company, no reval company can buy them.
It should be use for industrial goods only, no meaning to apply at consumer goods.
However if the industrial goods already selling to reval and apply "internal sales" later on, it will not enforce immediately.

Like wongheiming said, Internal Sales keeps a product or resource within your company only.

For example, if you own a gold mine and turn on internal sales only, only firms within your company will be able to buy the gold. Otherwise any company can buy the gold your mine produces (and turn it into other products).