If you're heater is on and you're blowing air on both the floor vents and face vents, pressing that button will cause the air for the face vents to bypass the heater core. This allows you to warm up your feet while keeping the rest of you from getting too warm. This information can be found in the Owner's Manual.
It's next to the rear defroster button. I had it in my '92, but it's not in my '96. I believe the function is incorporated into the heating system automatically in '93.5+ models. When the temperature lever is placed in a position that the blue and red bars overlap, cooler air comes out at the face level and hot air comes out at foot level. How cool and how hot depends on where you placed the lever. Make sense?
i think i was whining about this before, but my blue light is dead:*( . if anyone out there knows how to fix this (ie can you replace the bulb or do i need a whole new button), i will be your best friend. at least until someone finds a good fix for the cupholder problem.... actually if anyone has a spare button they are willing to part with, email me.
The air that comes out at face level with the button depressed is only as cool as outside temperature. Pressing the button doesn't cool the air; it just bypasses the heating core. The air coming out at face level will be cooler, but not necessarily cool. If you're sure it's not doing this then it sounds like something's broken.