Ive set "Who can view the membership of the group?" to everyone when creating a security group in 2010 and im wondering what this actually does? How do users without full control view this group as they dont have the site permissions option in site actions?
There are many ways to get to the group list, even without full control.
Groups can also be applied at a list or library level and users with full control of the list or library can be prevented from viewing group membership that way. It depends on the governance applied.
Also, even site administrators with full control will not be able to view the members of the group if that option is set to let only the group members view members. This is a way to prevent power users with full control of the site to view groups they don't own. Such groups could have been set up by a site collection admin, for example, who will always be able to see and change all group members.