To access this command, select any for any folder on your Mac in the Finder and choose Get Info (Command-I). If you look down to the lower portion of the Get Info window, you'll find the Sharing & Permissions section. Click the locked padlock icon, enter your account password, and then click the Action pop-up menu.
You can set batch file permissions from this portion of the Finder's Get Info window.
The idea behind the command is this: Suppose you want to change the permissions settings of most or all the items in a given folder. Perhaps you want to modify permissions so you can access the content of files you would normally be prevented from editing. Or perhaps the permissions of your own files have somehow gotten messed up so that you can no longer copy or move them.
Either way, "Apply to enclosed folders" can help. Rather than having to modify the permissions of each file individually, this command simultaneously changes the permissions of all the items in the selected folder--to match the settings listed the Sharing & Permissions section of the folder's Get Info window. Assuming the folder has the desired permissions settings, this command can quickly remedy your problem.
So far so good. The main problem is that this command has long been a quirky feature that often doesn't work the way you intended. Worse, if used on the wrong folder, it can wreak havoc even if you think everything has gone exactly as planned.
For starters, the command doesn't actually change the ownership of files, just their read and write permissions. This means that, if you were not the owner of the file before using the command, you still won't own it after afterwards--even if you are the owner of the enclosing folder. (In another quirk, if I delete the "staff" item from the Sharing & Permissions section of a file, and then select "Apply to enclosed items," a "wheel" item is added rather than "staff," even though "staff" is present in the enclosing folder.)
In other words, use this feature at your own risk. And be especially careful where you use it. I would never use it for the main or System Library folders, for example, as the changes you make could result in the Mac no longer having the permissions needed to boot from the drive.
As recently acknowledged by Apple, it's also a bad idea to use this command on your home folder (/Users/your user name). Should you do so, you may find that you are no longer able to move, rename, or create files in your Home directory due to "insufficient access privileges."
If this does happen, Apple describes a step-by-step recovery procedure. In brief, enter sudo chmod -RN ~ in Terminal, followed by starting up from an Install DVD and selecting "Reset Home Directory Permissions and ACLs" from the Rest Password utility.
More generally, unless you are sure you know what you are doing, I'd recommend staying away from the Ownership & Permissions section of Get Info windows. Even if you do know what you're doing, you're usually better off using the appropriate UNIX commands in Terminal or utilities such as Rainer Brockerhoff's XRay.