It does what it says – it optimizes your sql-database (really hard!).
From time to time it makes sense to log into phpMyAdmin, click the desired database, select all tables and select “optimize” from the drop-down.
My WordPress Database went down 4MB (from 20MB to 16MB), here are some figures after the optimization:
16 tables total
47.081 entries
MyISAM type
language: utf8_general_ci
size: 16,8 MB
overhead: 0 Bytes (was insanely high before the optimization)