In this mode, an automatic loop recognition will be used that can be controlled somewhat using the Stop Cut At Ngon and Stop Cut At Pole options.
Without polygon or edge selections, this tool will work like the Loop mode. However, if you first select a coherent selection path, the tool will try to follow this path (starting from the edge beneath the cursor).
An edge selection should look like that which the Ring Selection tool makes in Use Edge mode.
The Offset Mode defines how the loop cut should react to different polygon widths:
The Offset and Distance values are calculated starting from the reference point (green point). Enable the Toggle Direction option if the cut is made from the wrong edge when Offset Mode is set to Edge Distance.
This setting defines the number of loop cuts. This can also be done interactively in the Viewport by clicking on an orange loop cut with the MMB and dragging horizontally.
If enabled, only selected polygons or edges will be cut.
If enabled, newly created cut lines will be selected (visible only in Use Edge mode).
If enabled, polygons will also be cut. Otherwise only edges will be cut.