This device connects to a display that supports ARC (the audio return channel) and allows audio to be passed back to an older amplifier or receiver that does not support ARC. In this way, audio from your TV (from say a Netflix channel, or from a freeview channel being watched on the TV) can be passed back through the HDMI cable to this device, then converted to an optical signal which can be plugged into the audio input of your audio device.
Your TV must have an ARC enabled HDMI input, which allows audio to be sent back out through the same cable, and your amplifier must have an optical Toslink audio input in order for this device to work.
It is possible to connect other source devices, such as a DVD player, to your TV in the normal way as this device has both HDMI inputs and outputs. When used in this way, the ARC function can be switched off using the switch on the top of the unit and the audio will be passed to the TV in the normal way (the optical output will become inoperative in this mode).