Hey I have trouble to understand this option.

It says that blood moon will appear randomly, but with word "Range" I understand how long it will be.

Has anyone know how it works?

You have two settings:
Frequency and Range

Frequency is how often a Blood Moon will occur. Think of this as the least amount of time that can pass without a blood moon. Keep in mind, 7 Days to Die considers ONLY the daylight hours to be a day. So when night happens on day 7, that's technically day 8 per the game. When night happens on day 245, that's technically day 246.

Range is the maximum number of days passed the frequency can pass without a blood moon. Again, only daylight hours count.

So for example:
Frequency 7 and range 4.
This means that after a blood moon occurs, there will NOT be a blood moon for days 1, 2, 3, 4, 5, or 6. Then on the night of day 7, 8, 9 or 10, a blood moon will occur. It will be randomly chosen by those days.

Frequency 11 and range 1.
This means that after a blood moon occurs, there will NOT be a blood moon for days 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, or 11. Then on the night of day 11 a blood moon will occur. 

Frequency 2 and range 7.
This means that after a blood moon occurs, there will NOT be a blood moon for days 1, or 2. Then on the night of day 2,3,4,5,6,7, or 8 a blood moon will occur. 

I hope that cleaers things up.