This option rebuilds the LaunchServices, meaning it removes the links between documents and applications that can open them by default.
When you open a new type of document for the first time, you are presented with an alert message. You then have several options: allow your document to be opened by the application to which the System defaulted, let the Finder display this application in its surrounding subfolder, or cancel opening the document. After being opened a first time, the link between this type of document and the application that executed it is stored. Also stored are all installed applications, your choices of specific applications to open specific types of files, as well as your choice of a default web browser.
After rebuilding, double-clicking files or web-links can call unexpected applications. To change that back to your preferred settings, select a file of the desired type in the Finder, choose File/Get Info (Apple-I), select the application you prefer from the list of available choices in the Open With menu, then click Change All to tell the Finder that all similar files shall call that same application. The default web browser can be redefined in any browser's preferences pane. You can Rebuild LaunchServices to correct miscellaneous issues: Duplicated display or appearance of deleted applications in the shortcut menu's Open With command, incorrect icons for certain files and folders, or opening of the wrong application upon double-clicking a document.
LaunchServices can be rebuilt from the Rebuild tab of the Maintenance pane or from the Automation pane.
Warning: Rebuilding LaunchServices takes quite a while to execute. Wait for the task to complete.