This is a handy little device that can save your system from smoking. A resettable fuse (also known as a PTC) is a resistor that has very unique properties.
For this model, if your circuit tries to draw more than 250mA of current (if you have a bad short for instance) the PTC would 'trip' (by heating up). The increased resistance (trip state) would break the circuit and allow only a small leakage current.
The leakage current may still be enough to hurt some electronics but it's much less than the 3A that the short may have allowed. Removing the short, the PTC 'resets' and allows current up to 250mA to flow again. It's a resettable fuse that protects your system! Good for use on battery powered devices that need to protect again high-current accidental discharges.
The thermal pictures to the right do a great job of showing what happens when the PTC is tripped. The first thermal picture shows a voltage regulating circuit in its normal state. In the second picture the circuit is shorted, notice how hot the PTC gets (213 °F!) as it limits the amount of damaging current going through the circuit. Major thanks to Joshua Weaver for the great thermal shots!