The zoom tool is used for magnifying a selected part of the image.
The first option is called Auto-resize window. By default it's disabled. By enabling it, it will resize the window according to the size of the magnified area.
Underneath are two other options, for zooming in or out. As mentioned later, you can toggle between those two using a keyboard shortcut.
By selecting an area of the image, you can zoom in/out on that area.
Key Modifiers (defaults)
Ctrl - changes direction of zooming.
Ctrl + Mouse Wheel - spinning the mouse wheel, without clicking, varies the zoom (the zoom tool does not need to be selected for this).