This allows you to craft multiple lower-tier elements into higher tier elements, or break down one higher tier element into several lower ones.
In order to make lower grade elements to better one, you need 3x 1st rank to make one 2nd rank element. Later levels there is also option to dismantle better element for 3x lower rank elements.
There's also option to make one 2nd rank element out of 2x 2nd rank elements. It sounds stupid, but it might be useful if you got plenty of green ones for example and you need blue ones, you can try to make them by using this.