It's a free-hand shape maker. You pull the "line" and when you reach a point (say on a curved picture) where you have to make a turn, you give it a mouse-click and it sticks there, but you continue the "string" on around till you get back at the beginning. You can make any shape or outline anything with it.
I was fiddling around with it today. Kinda fun. Also the "magic wand" thing is interesting but I can't figure out how to control which bits the colors go into. I was practicing with one of my photos trying to get colors into a black and white picture. Ain't easy.
If you know of a good photoshop 7 tutorial, please let me know.