I only say this is unconfirmed because I have no idea what caused this to happen, but I've always set battles to Full (because I like to see stuff flying around and blowing up). That being said, at some point in my game (perhaps I touched a hotkey), battles started taking place on the map instead of the battle screen. I checked my options again and saw that nothing had changed and I even tried a few turns with the settings to normal, and then placing them back to full. No go.
Now the battle screen did return once I had a gorram ( <3 Firefly) enemy fighter eat up a transport on a one-to-one battle. The previous battles were fleet-to-one battles.
Now the question is this: Are battle screens SUPPOSED to happen for fleet-to-one battles or ONLY on fleet-to-fleet battles? I also noticed no battle screen when assaulting a planet. Basically, I like to see my enemies get trounced. haha