You are asked to type in the filename you wish to sign, and then PGP will ask for your passphrase. It will put the output file as filename.asc.
By default, this option will try to clearsign your file. If PGP determines that your file to be signed is not a textfile, it will sign it in the normal manner and then ASCII-ify the output.
After the signing is done, it will wait for you to tell it to return to the main menu.