resetting configuration to solve weird issues

I’ve often read around here and also I think I have seen support say to reset configuration and upgrade router in case of a problem.

I have always wondered exactly what this means and if it is needed I have questions:

1/ What kind of problems can this solve and what should I look for?

2/ If you have to reset it can you re apply a backup file or import an exported config or do they mean literally config it from scratch?