Basically it create a fixed die size based on that value and the number and size of gates after synthesis. It's a "guess" at how much area is needed but once that guess has been made, it's fixed, the results will have that area exactly. And then based on the target density it will try to fill that area with cells and place them in there. If the guess was too low, it will fail placement, if the guess was too high, the unused area will end up filled with filler cells.