In order for "#if defined(WDOG_CLK_OCO)" to resolve as true, earlier in the program, usually in a header there needs to be a "#define WDOG_CLK_OCO" definition. There's no value to the definition, but the if statement will resolve true and run the code. These defines are used for changing the program at compile time, usually for multiple types of hardware.
Usually these defines will always be left in the code, just commented/uncommented in order to change the code at compile time. Like this:
//#define WDOG_CLK_OCO //this define is commented out, so it will fall through to the else if
#define WDOG_CLK_CPU //this definition is not commented out, so it compile the else if code.
EDIT: Reading your text again, I think you might not understand that these #ifs are preprocessor commands and only evaluated at compile time. If neither of these definitions are in the definition table that code will not be compiled at all and it will be like it doesn't exist.