The area selection tools (lasso, rectangular, elliptical, and magic wand), allow you to create a selection of a certain area of the image (unlike the Select tool, which only selects specific elements). You can then use these selections to create new filled elements (from the context menu), or to cut/copy the existing content.
Switching between any of these tools will maintain the current selection, though switching to other tools may remove the selection (see next paragraph). If a selection already exists, you can add to it by holding the Ctrl key while drawing another selection. You can also remove from an existing selection by holding the Alt key while drawing another selection.
If you switch to any of the path based drawing tools (Pencil, Pen, Marker, etc.), any selections you have drawn will be maintained, and will be used to limit the drawing area (only points inside that selection will be recorded).
Lasso Tool: Allows you to draw a free form selection.
Rectangular Selection Tool: Draws a rectangular selection.
Elliptical Selection Tool: Draws an elliptical selection.
Magic Wand Tool: Selects all adjacent area of a similar color (the threshold option determines how closely the color must match).
Select Inverse Tool: Inverts the current selection in the canvas.