Extend an ancestor's material: add a new mesh section, and add its corresponding texture to the ancestor's material texture parameters.
Put a jacket on top of other clothing.
Grow hair on a bald character.
Put on a hat to partially cover the messy hair.
Add Mesh: The new mesh section that is added to the ancestor material. Clipping geometry is NOT automatically removed, there are specific procedures to achieve that.
(parent material image name): Texture added to the corresponding ancestor's texture parameter.
The ancestor material layout partition size defines the relative sizes of the materials. Each of the ancestor material images resolution defines what is the resolution of one block for that image for the added material. An extend material with a mesh layout with more partitions will use more space at the end, resulting in more detail but also a larger final texture. Further details and examples.
Material: Material extension. This output is not a substitute for the ancestor's material output, it does not mean that the material node can now be disconnected, it just contains the information to add the new mesh and texture to that material node, at the corresponding texture parameters.