What is Melt?
Melt allows you deform a piece of geometry based on an axis intersecting with a ground plane axis represented by a null object.  What that means is that the polygons of your melting object are flattened and pushed away from the center (or, more precisely, the pivot point) of the melting object as it is moved closer to the axis of the ground geometry.  In other words, it's exactly what you thought it was.

Why do I want Melt?
Why not?

How do I apply Melt?
        1.   Select the object that you want to melt.

      2   Go to the Setup tab and select Melt from the effects pulldown list, then click on the [+] button

      3.  The Melt parameters are set on the Animate or Setup tabs in the Melt block.

      4.  Once the parameters are set to your liking, you're ready to animate.  You can move the Melt
           null into the melting object, or you can leave the melt null where it is and pull the object toward it.

What's something I can use Melt for that I might not have thought of?
Apply Melt to the feet of a character so the bottoms squish slightly when he puts his weight onto them.

What else do I need to know about Melt?
1)  Because the Melt effect is a realtime effect, you can move the object around and see the effect happen.  

2)  With effects like this, the original shape of your geometry will affect the results. 

3)  Melt doesn't really use collision detection, so it won't shape the melting object around anything.

Warnings or tips...
1) The Melt effect doesn't use gravity on the melting geometry. It displaces evenly across a ground plane.  In other words, the melted object will not run down the sides of the ground object.  (Yes, I know I mentioned this in the section above; I just want to make sure it's understood.)

2) Melt is an artificial effect-- it gives the look of melting, but is not real dynamics. There is no collision detection.  (This is also related to #1.)

3) As with any tool, the more creative you are, the more unusual the results you can achieve.  Yes, I saw T2.  No, I won't be impressed if I see that effect on your reel.

Additional Information:  Click here for information about the Melt parameters block.