This artificial convention also works as a response bid to the 1 No Trump opener, and when the Response Bidder does not really want to stay in No Trump and feels that a suit bid will be a better option.
This is really the equivalent of the Weakness Takeout bid, and the only real reason that it exists is that it is often better for the stronger hand to be the one playing the cards, rather than having that hand being the dummy for everyone to see.
In this instance, the opening bid of 1 No Trump is followed by No Bid from the opposition. Then the Response bidder decides what suit they want to be in, and bids the one above it. So if you wanted to be in Diamonds, you would bid Clubs; if you wanted to be in Hearts, you would bid Diamonds, and if you wanted to be in Spades, you would bid Hearts. Then your partner would TRANSFER to the appropriate bid. This can of course cause confusion - if your partner forgets that you are using transfer bids and leaves you in a suit that you have no interest in whatsoever.
If this bid is being used in connection with the Stayman Convention, you cannot transfer into Diamonds because the 2 Club bid is reserved for asking for 4 card majors. So you can only use it to go into Hearts by bidding in Diamonds, and into Spades by bidding in Hearts.
In both of these above situations, if you want to be in Clubs, you will have to bid 3 - to avoid your partner either thinking you want to be in a 4 card major or in Diamonds.
So there certainly is potential for confusion - but it is a useful convention and worthwhile knowing.
Here is a typical hand that might consider using Transfers. Remember your partner will have opened with 1 No Trump.
61. What would you bid on this hand?
a. 2 Spades
b. 2 Hearts
c. No Bid