This function is used to produce a cue file describing the selected tracks.
A good summary of the format and supported tags in cue sheets can be found on Wikipedia. Various settings are available for the function in Settings - Cue Sheets.
You will be prompted for a name and location of the file to be created. This panel will also allow you to specify an optional title. If specified, the main TITLE tag in the cue file will use it. If not specified, the main TITLE tag will be given the album name, if it is consistent across all selected files.
Note that if all selected files are in the same folder and the destination of the cue file that folder, the FILE tags will be simple filenames. If the previous conditions are not met, the FILE tags will be full paths to the files.
Tracks in the cue file are sequentially numbered from 1 in the order of the selected files.