The mouse can be put into three kinds of modes The one you clicked now puts it into a selection mode In this mode, the mouse cursor turns into the regular mouse cursor you see normally in Windows i.e. an arrow pointing slightly to left.
When the mouse is in this mode, then you can click and drag to mark out a rectangle on the site and TAD examines what was inside that marked rectangle. If there are corners of some objects in there; then TAD would select those objects. If those objects were already selected; then TAD would de-select them. Read more on selection with mouse.
If you marked out rectangle as you also pressed the ALT key; then TAD would change the step size of the architect. That means the size of the architect would change as per that settings. Read more on the step size.
If there were absolutely NO corner in that dragged rectangle; then it will assume that you want to create an object of roughly that size. It will prompt you for the name of the object. Such an object would be created on the current class (One that is highlighted in the Class tree)