The Manual Chapters feature is used in conjunction with the "Custom Chapters" feature and enables the user to Insert chapter points on-the-fly while they are capturing their video.
When this feature is enabled & a button appears on the "Preview Monitor" and when this button is depressed a chapter point is immediately inserted (the capture continues uninterupted) and a dialogue window appears that allows you to enter text that can appear under the chapter thumbnail in the scene selection menu.
You can also initiate a chapter insert by hitting the enter key on the keyboard. Each time you initiate a chapter insert a timecode will be loaded into the "Custom Chapters" window along with the text you keyed in.
These can be modifed after the capture is complete if neccessary.