This mode is used in Missions where you have a command that sets the Region of Interest and using the Loiter turns command will cause it to circle that Lon,Lat and altitude area. So your camera will face the object throughout the circle or Loiter turn.
You can also use the Region of Interest to do fly byes to keep the camera on a target as it goes by.
The radius is controlled by a parameter set before you take flight and is not controlled by a command.
In Mission Planner on the planning tab it will show what the radius is set to and allow you to program a mission that can be loaded onto the copter.