It controls the blower/fan on the furnace/air handler. When in the ON position it will circulate the air in your home when the furnace or air conditioner is not running. In most homes, the thermostat is in the dining room on the first floor. When the furnace or air conditioner turns off, the conditioned air will move. The warm air will rise , while the cooler air will “fall” to replace that warm air that rose. It is called the stack effect. So while the thermostat is typically located at the midpoint in the home, the occupants in the top floor or basement do not receive the same level of comfort that the thermostat controls in the dining room on the main floor. By selecting the FAN to the ON position, this will allow the air to mix in between heating and cooling cycles. If not, the air will stratify one degree per foot. Running the fan continuously, will help to even out the temperatures in the home. While even temperatures contribute to comfort, some homeowners refrain from running the fan due to equipment noise and electrical consumption. While the air movement will help the home feel cooler in the summer, in the winter, it may make the home feel drafty. Try it, you might like it, especially in the summer.