You pretty much reset your character in-game. It'll cause you to spawn in Lonely Cave as if you've just created the character, unless you've set your home somewhere else.
It's a very helpful tool in case your character gets stuck in a map that has crashed/been shut down/is full, etc.
You can also reset your home button on there and afterwards press "Go Home", this is probably in case your character is stuck in a crashing map etc.
