Welp, tested it myself. There even was an unique explanation tooltip which is a good sign. And it really does what it says, you even can abort mission, pulling out forces and try again. (No highlighted area though, you need to be inside sandbags starting area) The alien behavior is same as base assault - they would try to destroy everything they see. Guess I gonna play with this feature now on.
Anyway, I've always been curious: what will happen if you blow up reactor on alien base while being on retaking mission without this option?
P.S. just tested, your base is destroyed if alien reactor goes boom. Fair deal.