Basically squishes anything 'shared', 'sponsored', or originating from a page or person that you're not directly following.
This extension modifies your facebook news feed by 'squishing' posts that were created by anyone outside of your network. This includes posts like "Jason shared NewsNetwork's post", and "Beth commented on NewsNetwork's status" (assuming that you don't follow NewsNetwork).
The posts are not completely removed - they're just blurred out and shrunk. You can still hover over them to see and interact with them, if you wish.