You don’t see actors praised for their good discretion these days. When you read the reviews in the New York Times, they don’t proclaim, “This extraordinary performer has such good discretion. Run to get tickets!”
Part of me wishes they would. I see so many performances that lack discretion or perhaps another way to say it would be that they lack subtlety, restraint and intelligence. I link discretion with restraint more than anything. I imagine that when Polonius compliments Hamlet on his good discretion, he’s praising an authenticity. He’s praising his ability to not be too histrionic. (Unless of course he’s been histrionic in his recitation, and this line becomes sarcastic? Or ironic in some way?)