This is typically used to output a clamping code for the 4th or 5th axis. The codes can be customized in the post. The Auto option "Should" output the unclamp and clamp codes before and after rotary motion, although in the real world this sometimes need some customization in the post.
Yes - these are intended to clamp an axis so it cannot move.
For many old NX machines, it was considered a poor practice to rely on the servos to hold the axis in position. Mechanically clamping the axis was more rigid, and less strain on the servo motors.
For example, in a 3+2 situation, you would move the rotary axis, then mechanically clamp them, do your machining, then unclamp them and rotate to a new position.