The Show/Hide tag button is used to conceal control tags so that the view of the document while creating it more accurately portrays the output document. When pressing the large button, it will set the text of the tag field to hidden, or shown by setting Word's view to show or hide the specified text.

There is also a drop-down option labelled Refresh Hide Tags, which will mark all control tags as hidden. If a paragraph contains nothing but control tags, the paragraph will also be marked hidden, however if a paragraph contains at least 1 piece of non control tag content, it will not be marked as hidden. A scan is used so that a paragraph is not marked as hidden before the non control content is added.

Note how similar the word view is to the output with hide tags enabled compared to the hide tags being disabled.