The Highlighter feature works in conjunction with many Impact tools that require entities to be identified.
When the tool is running and the Highlighter option is switched on in the Options - Environment - Display section, entities will be emphasised as the mouse hovers over them. Only those entities that are relevant to the current tool will be highlighted. For example, the Text Editor tool will only highlight text entities.
The highlighter allows you to see which entity will be identified when you click the mouse. An example, when using the Trim - Fillet tool, is shown below.
Highlighted Entity
The highlighter colour can be configured in the Options - Environment - Colours section.