In simplistic terms, in a brushless motor you have an electromagnet pulling on a permanent magnet (the rotor) to make it turn. Timing is the point at which the electromagnet is energized in relation to the rotor position.

The further away the rotor is from the electromagnet, the more energy can be applied to the rotor and make it spin faster. But the further away it is, it has less strength and it's harder it is to pull the rotor, hence less torque.

Total timing is the combination of both motor and ESC timing. In general more timing increases RPMs but reduces torque. More timing increases heat.

3.5 degrees of timing is such a small change, that unless you had the motor on a dyno, you probably wouldn't notice.