What it does it makes a new copy of the avatars items and avatar and places copy of all items into a new avatar folder in inventory for you so you can now edit the avatar knowing you wont mess up the original and save you hours of work to make a folder with them all when there all scatter all over.
Example I have a bom layer feral avatar I get a new part for it so I need to drop the new parts on the ground add them to it
to make a new version from my old version I like.
I make a new copy so I wont mess up the old bom or physical attached parts like fluff and fur.
I chose make new avatar copy from the outfit menu then I right click go to outfit in inventory then I take the parts drop on ground when I finish editing I right click and choose take object now I just created a new avatar fast really fast and those parts are back in my inventory before I have to copy each part one at a time from all scattered locations ware the parts were for the original one..