When you specify this option, PGPMenu will ask you the name of the key you would like to sign. This key must already be on your keyring. The PGP will ask you for your passphrase and attempt to sign the key.
You should only sign a key if you are certain the key in question belongs to the user listed in the key's UserID field. One way to help verify a key is by using the key fingerprint to verify that the key you obtains is the same key as the user thinks.
If the signing is successful, PGP will ask you how much you trust this person to sign other keys. This is an important question for you to think about before you answer. This question is asking how much you trust this other person to only sign keys that they know belong to the user claimed in the UserID.
When the key signing finishes, PGPMenu will wait for you to tell it to return to the key management menu.