the PHP mail() function is a fairly insecure method of sending mail, and it sounds like your host is trying to move away from using it and suggesting you use more secure mailing methods, such as Pear Mail.
In Universal Email, on the SMTP server settings tab, you can select to use mail, or use Pear Mail using SMTP. Double check with the host that they have Pear Mail installed for your site and you can use that. Pears Mail offers more security.