It allows you to set a point before a launch that the train will stop for....
Wait, so I had to check this out (I've been absent for months from the game). When did we get LSM holding sections? I totally missed the news about that. I'm certain I didn't see this track piece before. I've been wanting to stop the car at certain parts of track for a long time, and now it's possible. Looks like a max of 10 second hold time, but I'll take it!
Edit - Looking at the Zenith, it doesn't have the hold section piece, so you can't completely stop the car. So this LSM hold section piece must be a new thing today, and wasn't available previously on other coasters. In the update notes the wording gives the impression the LSM hold section utility is an existing feature now added to more coasters, but it appears to be a brand new feature? Cool!