This is the Hero Formation Editor. If you want to vary the positions where heroes stand in a battle formation, you can do it here. Then you must go to the Individual Enemy Formation Editor and choose which hero formation to use. 

Use the Up and Down arrow keys (or PgUp, PgDn, Home, and End) to navigate the menu.

<Hero Formation #>: Choose which formation you are working on. This number will be used to assign this hero formation to be used by enemy formations.

You can press CTRL+D to revert a hero slot to its default position.