This tool automatically bevels the edges of an object before applying subdivision smoothing resulting in a gentle softening only around the edges. This is different from the Subdivision tool, which applies no beveling.
Select Subdivision Soften tool.
Set desired bevel Distance in Tool Options palette.
Click on object and the object is automatically beveled then smoothed using subdivision.
Note, you can dynamically drag blue arrow or type a new value for the Distance in Tool Options.