In other words, applying a rotation to the root object is the same as rotating the whole scene. By selecting another object than root you can alter this object's transformation. When doing this, sibling nodes of the currently selected one are NOT transformed. Finally, right below the object list box you can see a group of three buttons called reset, normalize and center. This button resets the transformation of the current object.
Nothing changes for parent nodes of children, they all keep their own transformations untouched.
However, applied to another currentObject, this is what should happen. This function translates and scales the bounding box of the geometries in the sub tree rooted at the current object in such a way that the bounding box roughly fills the Camera. When applied to root, this gives you a nice view of the whole scene. When applied to another object in the scene, its bounding box should fill the camera. This button sets the center of rotation of the current object to the center of gravity of all the vertices found in that geometry and all its children.