extension_discovery_scan_tests is not documented

Um... What does this setting actually do? If it's TRUE, what effect does it have? I guess I don't know from reading this documentation what "extension discovery" is or how it would affect my install of Drupal. An additional line explaining this could be useful.

Better! How about this small tweak to the wording:

This setting enables the inclusion of test extensions during extension discovery; i.e., it forces discovery of modules under 'tests' directories.

Also, just to clarify: did you mean "i.e." (that is) or "e.g." (for example) here? In other words, is it just modules in tests directories that are discovered, or are there other examples of things that are discovered when you turn this on? If it's really "i.e.", then this could be simplified to say:

This setting forces discovery of modules under 'tests' directories, which are normally ignored during extension discovery.

If it's really e.g., then probably it's best to write out "for example", because (as in this case) this is often confused with i.e. and writing it out in words is clearer.

Agreed, this is very clear, thanks! Nitpick: there should be a comma after "for example", if you're going to use a ; before it. Or change the ; to a , and then you're OK.

So it should be either one of these:
... directory, for example a module ...
... directory; for example, a module ...

That's a duplicate of #2327095: Document how to allow test module and theme installation in example.settings.local.php which is already RTBC

You could merge the commit message if you care.