The Archive option moves data, based on an aged date, which you can ammend
in archive settings, from your current data file to an archive data file.
As I recollect the default Archive setting is for 'older than 6 months'
Your current data file will be reduced in size as the data is no longer help
in that data file. It might also make your data more managable from a user
point of view.
You can have the Archive data file open within outlook and old data is
accessible
Some peoples keep seperate archives by year, ie Archive2007, Archive2008 etc