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Yes its for Free Transform, You can resize the object.
It selects the object you are working in, means shows Transform Controls
It's the Free Transform command. It allows you to alter the selected layer. Right clicking on an the transform gives you specific functions - rotate, perspective and distort to name a few.
Free transform. If you apply Control+T to any layer you can resize it how you wish. Keep in mind though if you want to resize the layer back up again you will lose detail so make sure you convert your layer to a smart object before you resize it down. This is very useful for company logos where you change your mind and want to scale it up again.
Hope this helps.
