1) In configuration terms, you enable it globally on the switch, then on each VLAN you want, then set each port on the switch to either 'untrusted' or 'trusted' - with trusted being a port where you would expect DHCP offers to be rec'd (i.e. server ports or uplinks), and untrusted being a port where you would expect DHCP Discover packets (i.e. end user ports).
2) It prevents DHCP offers coming from 'edge' or 'untrusted' ports - for example stopping someone plugging in an AP or web router that gives out DHCP and disrupts service on your net work.
3) It also does several other checks - e.g. checks that DHCP packets on 'untrusted' ports are being sent for only real MAC addresses on the port (so one PC can't use up all your scope addresses, or release someone else's IP address lease).
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