Extrusion works by the motor pushing the filament forward, causing pressure behind the nozzle, and the filament melting and extruding out the end. When your printer wants to stop extruding ( ie moving to a new part or section to print without printing anything in the middle), it makes a retraction to pull the filament back, releasing the pressure behind the nozzle, and stopping the filament from extruding out.
In a perfect world, a full retraction would not be necessary; not pushing the filament forward should stop the pressure buildup, and stop the filament from flowing. However, we don't live in a perfect world, and so backing the filament up a small amount is necessary to stop it from flowing.
Finding out exactly how much you need to back the filament up is the purpose of this test. Back the filament up too much, and you can create clogging issues, extrusion issues caused by the filament not being at the end of the nozzle at the beginning of the extrusion, and (slightly) increased print time; don't back the filament up far enough, and filament will continue extruding out the nozzle, causing stringing.
The test works by having you lower your retraction distance to a very small number ( a lot of tests will have you disable retraction altogether, ie 0 mm), and slowly increase it from there. The idea is that the bottom of the tower will look like hot garbage, and slowly improve as the retraction increases; what's the quality stops improving, you know that that is your ideal retraction distance.
If you have a Bowden tube setup, a good retraction Tower would have values ranging from 0 mm to around 10 mm. Direct drive extruders need far less retraction; 0 to 2 mm in 0.2 mm increments should be good. Again, you're looking for the first setting that gets rid of stringing.
Let me know if you need any help or have further questions! Retraction can be really tricky to understand mechanically, but can be important for improving print quality and reducing the need for post-processing.