Cutting a subject out of its background is what lets you place it on a cover, a mockup or a promotional graphic without a rectangle of the wrong colour around it. The output is a transparent PNG rather than a picture with white behind it.
How well it works depends almost entirely on the edge between subject and background. A product photographed against a plain contrasting wall separates cleanly. Hair, fur, foliage, lace, motion blur and anything semi-transparent are genuinely hard, because there is no single line where subject stops and background starts.
Expect to touch up detailed subjects by hand. Automatic removal gets you most of the way; the last few percent on a difficult edge is still manual work.
Anything without a clear edge: hair against a busy background, fur, foliage, lace, motion blur, and semi-transparent materials such as glass or smoke. Low contrast between subject and background also makes separation unreliable.
Edge pixels blend subject and background together, so some of the original colour survives the cut. It is most visible when the subject is placed on a very different colour, and it is fixed by refining the edge in an image editor.
The image is sent to KDP Tools and written to disk on the server, under a name that includes your original filename, because the separation runs there rather than in your browser. It is processed locally on our server and is not sent to any third-party service. The result is returned to you in the response itself, so no output file is stored and no shareable link is created. The uploaded file is then deleted, but that deletion is best-effort: it happens after the response is sent, it is skipped if the removal fails, and it is not retried. Do not upload images you could not risk remaining on a server, and use desktop software for anything sensitive.