The Magic Wand Tool is one of the tools that in theory sounds great but in practice isn't all that usefull because doesn't work predictably. The tool works by selecting an area of pixels which are of similar color to the pixel you clicked on with the Wand. You can control how close pixel color must match by setting the tolerance in the toolbar, the lower the number, the closer the adjacent color must match before it is included in the selection. You can also set the Wand to select all colors in the image which are similar (rather than just adjacent pixels) by checking the Contiguous box.
I Mostly use the Magic Wand Tool for when I need to select something from an image which is set on a solid colored background, otherwise you usually get a mess of selection lines.
Magic Wand