SetDayNightModels is a function that sets the lighting models for day & night. The lighting model is a model that defines "where" the sun is and what kind of light it emits. For example, you could have a day model that has a sun with a bright yellow color, which would make all objects (units, doodads, terrain) in the game look yellowish. You could have a night model that has a sun with a dark blue color, which would make all objects look dark. This is - by the way - how the game simulates "night time" in melee games.
If you set the day/night models to "", you set the models to a path that doesn't exist, which makes warcraft 3 use a default "black", turning the entire map into complete darkness.
The light models are global, meaning that they affect the *entire* map, similarly to how our sun affects the entire planet (or at least half of it). You can however place individual lights on the map (such as the "Torch Glowing" doodad IIRC) which is a "local" light and only lightens nearby models.
I'm not entirely sure what your real goal is, but I'm assuming you want a unit to carry a candle which lightens the surrounding terrain. Here's the "best" way to do this:
1) Download a model that emits light (I can't find one on this site but I know there are a few light models in the Ultimate Terraining map)
2) Create a passive ability in the object editor and set the "Art - Caster" field to the light model (I'm not sure if it's "Art - Caster", it may be one of the other art fields).
3) Add the ability to the unit (or add it to an item which your unit can carry).
4) Your unit should now emit light
If you just want static lights, you can simply create a doodad and set its model to the light model.
