This function is for application developers or for people, who want to modify icons in their application. As such it is a bit dangerous, because it changes the application in question. It is a good idea to back up the original file before using it.
The help topic can be accessed by simply clicking the Help button in the dialog that appears when the function is executed.
When you select an application and then an icon inside that application and click OK, that icon will be replaced by the icon that is currently opened in RW Icon Editor.
Let me know if you are still having problems.