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Places Overlays (texture decals) on the terrain. Each tileset will also have it's default set of overlays. They are listed at the bottom of the menu as 0, 1, 2 etc. Select each number to view the overlays available to place. Use +/- to change the size of the overlay. Left click the terrain to place the overlay.
On the top of the menu, you'll see "Add, Decal, Glow, Modulate".
Add - Places the overlay and tints it the same color as the terrain color (more blended-in look) Decal - Places the overlay with no tinting (popped-out look) Glow - Feature incomplete Modulate - Feature incomplete