Use this tool to independently influence the highlights and the shadows of the image.
In order to separate the dark areas from the light ones, a lightness mask (invisible to the user) is created. There are two algorithms for doing this; one blurs the image, while the other retains sharp edges between light and dark zones. Neither one is "better", both have their own merits. The soft mask approach can lead to halos, but it is quick. The sharp mask is slow, but it doesn't cause halos, though it can cause edge artifacts at close inspection.
The Highlights slider makes the brightest parts of the image less bright without touching the darker tones. To make the effect stronger, use higher values. A slider value of 100 will turn the whites light gray.
Tonal Width for Highlights
This slider controls the strength of the Highlights slider. Higher values give a stronger effect. A value of 100, combined with Highlights 100, turns the whites into middle gray (you probably won't want that...).
This slider lifts the shadows and applies an effect that is sometimes called 'fill-light' (or 'fill-flash') in other software. Higher values lighten the shadow areas more.
Tonal Width for Shadows
This slider controls the strength of the Shadows slider. A maximum value of 100 gives the strongest 'lift shadows' effect.
Local Contrast is an adaptive contrast adjustment depending on contrast within a specified area. It increases contrast in small areas while keeping the global contrast (which can be set with the contrast sliders in Exposure or Lab). The resulting image will look more 'three-dimensional'. This feature is very useful when you have a foggy image or took your picture through a window. The effect is somewhat similar to an unsharp mask with a high radius and a small value. A setting between 5 and 20 works best for most shots.
The value of the Radius slider influences the Highlights, Shadows and Local Contrast sliders. The larger the radius, the stronger the effect of local contrast. The effective area of the Highlights and Shadows sliders also increases.
If you are bored, set the first four sliders to 100 and play with Local Contrast to transform your favorite raw processor into a cheap effect machine!