What is the usage of the Config button in Toolbars and how do you add one?

It opens in modal window, the configuration of your component.
For example ACL's configurations (1.6 or later)
In the future, some component parameters wil be placed there. (And very soon with the files and images handling functionalities will use some parameters)

Always instance it on at least one back-collection layout in order to be able to access it.