It lets you pick up things that are far away, then bring the items to you so you can grab them. If the "Grab" text shows up in red, you can pick it up with Telekinesis (RB). Then, you can use (L) to bring the item toward you and (R) to push it away. Press (L) and (R) at the same time to drop the item.
It's handy for stealing stuff, especially if you don't have a very good Sneak skill. My character has a high Sneak skill, but I still use Telekinesis because it's fun. Totally.
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