When you specify this option, PGPMenu will ask you the name of the key you would like to extract from your keyring. Then it will ask you what file you'd like to use to store the key (the default option is to have PGP print the key on your screen).
PGP will then try to exract the key you asked for and place it in ASCII Armor, writing it to the desginated location. This key can then be used to send to someone else, or to a keyserver, since it is in a form easily added to a keyring.
When the key extraction finishes, PGPMenu will wait for you to tell it to return to the key management menu.