The budget optimizer tool adjusts your maximum CPC for you all of your keywords individually so that you can gain the most amount of clicks from your budget.
This is generally best to use when your main objective is getting traffic, it can also be useful to get a good idea about how much you need to bid for keywords to receive traffic.
I wouldn't recommend using this tool on a permanent basis though as allowing Google to change your bid means you can pay over the odds for a lot of your clicks.