Hi! First of im thrilled to hear that you tried out my software. I know that much are left unexplained and im planing to releasing a documentation and some video guides but as it's still in an alpha stage, missing some key features and constantly getting it's user interface rearranged such material would be outdated in a matter of days. Later on when the appearance is more stable I'll definitely release such material. Now to your questions:
1.The program scans your add-on package folder and parse every .var in the top level directory, the .vars are moved and sorted (by creator) to the database folder (that you chose the path to)
2. This version got no way to communicate with vam and should be run before you launch vam. Im planing on letting vam communicate with my program but that's not implemented yet.
3.as of now the tool is only able to apply collections before vam launches, therefore a restart of the application is needed before a collection is properly applied. I'm working on a way to remove this requirement for future versions.
4.did not know this, there might be other add-ons also using this folder name, in that case use something else instead, like "varmanager" or really just anything else.
5. Guess this should be explained better

"rebuild images" rebuilds the image for every var the manager knows (as really slow operation) of while "rebuild active images" only rebuild the images of the var files currently in the active collection. Rebuilding images can be done to include other image paths, change the preview resolution or change other rulesets avaliable.
6.the first one adds all dependencies of a given depth of every item in the active collection to the active collection, the other option only adds dependencies of the selected items in the active collection. So if i have a fileA that depends on fileB that depends on fileC and I add dependencies of depth 1, only the first level dependencies are added, in our case fileB. If i add of depth 2 both fileB and fileC are added. Vam sometimes have very deep dependency trees that even can be circular, this is a way to only add a reasonable level of dependencies.
7.This feature is planned but not present yet, as of now you have to do it manually, but it's kinda easy. In windows explorer got to your database folder, in that folder search for .var, sort by type and make sure no "group by" is enabled (just right click in the explorer window to get these options) the cut out every var that is found and place them back in to your Addonpackage folder inside of vam. After you have done this you can delete your database folder.
Im sorry for all the confusion and love to hear your feedback, for some reason I didn't get any notification about your reply here so i missed it, will make sure to regularly check this channel and answer further questions.