The Melt tool is a tool that uses a Gaussian blur to subtract mass from a surface. The best way to describe it is being the opposite of the Weld tool. Rather than flaring out edges or filling in seams it can be used to melt into or carve away at surfaces in a way that blends in with the existing terrain to make things like erosion patterns. It is partially configured using the brush settings and has a few more settings that change the algorithm in specific ways.
The Smoothing strength can be adjusted to make smoother melting paths, a higher smoothing setting means that the tool will need a lower threshold to operate as they constrain each other. Generally a higher smoothing strength will also increase the size of the affected area.
The Smoothing threshold can be adjusted to make it harder for the tool to affect a given area. This makes it possible to constrain the tool in a way that helps to create more natural looking carvings and erosion patterns.