The delivery deduplication works the same as the "Advanced Campaign Deduplication" - meaning that if you have both email / phone1 selected in the dropdown, both fields will need to be identical to another lead at the same time to skip this delivery. This article goes over the Campaign Deduplication.

Campaign deduplication results in duplicate leads landing in system rejections.

Delivery deduplication (and buyer deduplication) results in the leads skipping on the delivery and attempting delivery on a different delivery instead.

You can find the option to enable this in your delivery settings under "Main Details", right at the top of your delivery settings.

Now you've enabled the dedupe, each time a lead passes through the delivery a "hash" is formed using the field you selected.

This "hash" is then checked against to make sure future leads being sent through haven't been previously delivered.

Example - 

In the screenshot above, I have set my delivery dedupe against the email field but only for 30 days. 

After 30 days a lead with the same email will be permitted through this delivery again.

Another example would be using fields that have more than one answer. 

Field: Do you have a mortgage?
Answer: Yes/No 

If deduplication was enabled for this field with email also selected: a single lead could be posted to the given delivery twice. Once for each answer, with the lead sharing the same email address.

PLEASE NOTE

If you have multiple deliveries per Buyer this feature will ONLY prevent duplicate leads from being sent on the delivery the dedupe is set on. 

The "hash" is not shared between deliveries. The dedupe will ONLY build this "hash" (and therefore begin dupe checking) once a lead has passed through THAT delivery.

Check out the article below for deduplication between buyers - 

Deduplication on a Buyer

Further to the previous point, this will not work for historic leads as a lead has to pass through the delivery AFTER the dedupe is turned on for the hash to be built.