Good question, I can't find it in the manual.

But it seems to make the content fit by changing the object size so that the information is fully visible.

It does this in several ways so it takes the width or the height, I think it also depends on the object itself.

It takes one site that you have set and adjusts the other (hor or vert) to make sure it shows up fully.

So it's more to see that you show in contents to the ratio of the object.

for instance a picture, if it is 200x400 and you have selected 300x800 and use the function it will make it 300x600 (ratio is 1:2)

But some content has multiple sizes so it will adjust to that as well, that makes it look like it is a bit strange in handling, specially for objects that can adjust to different sizing by shifting the contens inside.

Hope this makes it a bit more clear. I always set it myself and check and if needed I use the 2 mini pixel windows in x5 (width/height and placing from top to left of the object)