It mutes the ringer in case you get a phone call at an inopportune time while your phone is holstered (as an example), pauses the media player, and in the past, it turned on the media player and shuffled through your entire playlist. I'm not sure if it does that anymore, as I couldn't figure out what was going on for the longest time. I thought my BlackBerry was haunted.
I pressed that button on a call by accident i could hear the other person but she could not hear me after i ended the call took a while to suss out what happened though.