The option “Remove files not on source” is available for one-way syncs in the Destination tab in the sync item’s settings. If enabled, all files and directories that are not on the source (anymore) and are not explicitly excluded will be removed (see Exclude files). This option is not visible for two-way syncs since it is standard behaviour to always remove a file from one side if it is removed from the other.
The option “Remove excluded files”, which you can find in the Advanced tab in the sync item’s settings, deletes all files that are excluded by any of the filters in the Exclude tab. As an example, this option can be useful to delete hidden files left over by a previous copy performed in the Finder. In this case it is recommended to enable this option only at the beginning, run the sync once, and then keep it disabled, so that it will leave hidden files such as .DS_STORE files (which store Finder metadata) and the .Spotlight-V100 directory (which contains the Spotlight index) alone.