Inflate your milling path by half the diameter of your endmill. If you are using a 0.5mm endmill, then enter 0.25mm above. If you are using a V-bit then figure out the diameter based on how deep you'll mill. Copper on FR4 is usually 1 oz = 0.035mm, 2 oz = 0.07mm, 3 oz = 0.105mm thick. If you use ChiliPeppr's Auto-Level, you could safely mill with depths of 1 oz = 0.07mm, 2 oz = 0.1mm (most popular), 3 oz = 0.15mm. That means a V-bit with a 45° angle at 0.1mm depth will have a diameter of roughly 0.1mm. So, you could use 0.05mm above, however, in practice it would be best to inflate further than that to be safe.

This value does not affect how your Gcode is created, rather it just lets you visualize where your endmill will travel. The size you place here is simulated in the 3D viewer along the inflated milling path you specified above. It is common to mill PCB's with an endmill larger than what should exactly be used at the cost of cutting off more copper from signals/vias/pads. To ensure you aren't causing any actual problems, look at where the cyan line goes to understand.

The magic wand looks at all milling paths and if any point in a path is within the magic wand distance of another path, the two points will be averaged. This essentially pulls the milling away from the copper to better center the endmill path between two pads of copper. On SMD's this can be especially helpful as you will want your endmill to travel on the narrowest path between the SMD points. It's important to get your "Inflate" value correct first for your board and then to adjust this value until you like the outcome of your final milling path.

The Magic Wand (not working yet) inflates your milling paths, but if it finds an overlap, it averages both paths to create a line, so you get no overlap. This allows you to inflate your milling path by very large amounts, but let the Magic Wand do the hard work of calculating the best middle path. This is especially useful when milling small SMD paths, while still trying to make your traces as wide as possible for the best milling results.

This allows you to hide the popup windows as you mouse around with the 3D viewer. They can sometimes get in the way when iterating the best endmill sizes and inflate by values.