It turns out this sets the default duration of new events in iCal. The defaults command below sets it to 15 minutes. You should quit iCal before running this to see the result. Open Terminal, enter the following and press return:
defaults write com.apple.iCal 'Default duration in minutes for new event' 15
Then open iCal. New events entered by double clicking or pressing Command-N will have the default time of 15 minutes. Obviously, you can set different values. To remove this setting altogether, enter the following in the Terminal and re-start iCal:
defaults delete com.apple.iCal 'Default duration in minutes for new event'
I've not noticed this hidden iCal default mentioned anywhere else.