The subject line says it all - when you hit this switch - what is happening with the plug-in and the routing of the signal?
 
Thanks in advance!

It makes the key input to the compressor available to other sources rather than the incoming signal on the current track. So you can use say the kick drum output to key the compressor on the bass track this effectively can compress the bass in time with the kick drum. Can be used for ducking, or just building a sympathetic response to another rhythm source in your track.

I think I understand the side chaining concept but am missing one point.
Which track controls which?
IOW if you want the Kick's compressor to be the "master" and have it control the bass line, do you have the compressor on the Kick track?

No, the kicks compressor doesn't control the bass. The bass compressor has the side chain turned on which makes it accessible to other inputs which can control it. You have to start your process with the question, "What needs to be controlled?". Then turn on the compressor sidechain for that target. It now exposes the compressor input to other tracks for input.  

Great bread & butter Q&A. 8-)

Truthfully...I do not understand the concept of sidechaining. Can someone point me to how, why and where and when to use it? ...or maybe point me to a good source of info on it? Thanks!

Go to Youtube and search "sonar sidechaining". There are some vids out there. Here's one: http://www.youtube.com/watch?v=oFTUJP-qs1Q

Basically, sidechaining allows you to trigger an effect on one track by using the sound from another track.
 
In other words, you can make a synth pad pulse in time by sidechaining it to your kick track. Every time the kick drum hits, the synth pad will momentarily drop in volume and then come back up. You hear this effect all the time on dance music, and more-and-more on pop hits.
 
Here's a great Sound on Sound article that explains the details. http://www.soundonsound.com/sos/nov06/articles/sidechain.htm

Thanks as always guys!

Good sources above but just a couple of comments.

1. Can be used for ducking a track or group. Radio does this when you hear the voice come forward and the music behind go down, but just when the voice is talking.
2. Can be used when two instruments compete for frequency range and you want one turned down slightly when the other is active. i.e. the kick for some types of music needs to be in your face. Duck the bass guitar which is in the same frequency range when the kick strikes. This gives you consistent punch.
3. Frequency specific ducking. Put an EQ in front of the compressor so that only a specific range is available when the compression starts. Let's say you want an acoustic guitar to duck slightly in the vocal range keyed by the voice or even the frequency range of another guitar.  
4. Frequency specific ducking for reverb to control the reverb when a voice comes in loud.

Lot's of uses. But the kick/bass and voice vs. music are the generally the most often used.