This option enables you to control if TinyMCE is to be clever and restore urls to their original values. URLs are auto converted/messed up by default since the built in browser logic works this way, there is no way to get the real URL unless you store it away. If you set this option to false it will try to keep these URLs intact. This option is set to true by default that means URLs will be forced absolute or relative depending on the state of relative_urls.
Example of usage of the convert_urls option:
tinyMCE.init({
...
convert_urls : false
});