Understanding Circuitry from a Datasheet
It looks like "Latch On Fault" is an optional switch via which you can set the behavior to display in case of a fault. It does not change with the fault state.

The logic is quite simple:

Pin 14 is low on fault, pin 7 is high for enabled. Now if you connect these pins, e.g. via a closed switch, once a fault is detected it also disables the motor by pulling enable low. If the switch is open, a fault will not disable the motor.

The reset button pulls the enable pin high again, overriding the fault signal of pin 14.

(For this logic to actually work, during fault pin 14 must stay low even when enable goes/is low.)