Originally Posted by AdamG
It was a feature that was never fully implemented. The general concensus is that it was to increase walking speed.
Sadly the general consesus was incorrect, as has been said many times.
When I designed the game's options screen with Randy when season one was first being built, we left an empty space in there in case an extra feature was added (there was talk of a tutorial, or possibly a hint system). We decided to fill the space with something random until a new feature came to take its place, and Randy put "warp drive" there I think to have a sort of ambiguously functional menu item there in the tradition of the "enable SCUMM 3D" option in Monkey Island 3. As it turned out, there was never a new feature for that space in the course of the entire season, so Warp Drive remained there the whole time, confusing the heck out of everyone. Woo.