I just finished the main story (and DLCs except Point Lookout) of FO3, so I've got solid info: the description President Eden gives is that it [paraphrased, probably] "kills everyone who has any sort of mutation". He points out that this means everyone you ever met outside of the Vault and the Enclave. He also says that "thanks to your upbringing in the Vault, you would also be immune."
That last part is a lie, based on what others have said, but other than that it seems it even kills those who were affected simply by radiation. Which is practically any- and everyone in the Wasteland. (Dunno how the Enclave wouldn't get affected)
I'm not quite sure how you differentiate between random mutations and radiation/FEV-caused mutations though, but I guess we can leave that out as a plothole, because Modified FEV. Then again, Eden might be wrong and it'll slowly kill everyone.
Not sure if it only affects humans or animals as well. I can imagine that it kills everyone with non-standard human DNA/structure, so it would basically turn the already empty wasteland into an even more empty wasteland. That's why it's an option that I'd only choose if I was really going for a "bad karma choices only" playthrough, since even an evil character should see that this option would probably just extinct all life in the Capital Wasteland. (Since most Vaults are already opened and affected by the outside radiation, dead or abandoned.)