When adding a Wait SMS action in a test, by default, the action will wait for new SMS received since the start of this action. If a SMS was received one second before the Wait SMS, it will be ignored.
The option Check SMS Reception from is used to check for SMS that were received prior to the beginning of the action. For instance, if you set it to Check SMS Reception from step 1, it'll take into account SMS that were received at earliest at the start of the step 1.