Blue Kenue simply assumes an isotropic coordinate system.
The coordinate system of your mesh will be in the same coordinate system as your source data (the outline, hard/soft lines, points, etc.).
If your source data coordinates are in meters then lengths are also in meters.
If your source data is in degrees (lat/log) then your density will have to be in degrees as well. (can be done but it's a bit awkward)
I usually find it's best to project all source data to something like UTM or Polar Stereo, generate the mesh and project the resulting mesh to LatLong. The choice of intermediate coordinate system depends on the size of your domain.
Hope this helps... Martin