Just like "Draw Line," except that the shape defined by the points is "closed" into a polygon as soon as you put down more than two points. To draw a polygon:
Select the "Draw Polygon" radio button, move your cursor to the place on the map where you want to place the starting "corner" of the polygon, and click down once.
Click again to lay a second point. Keep on clicking until to add multiple points. Like with the point tool, you can draw smooth shapes by holding down Shift, clicking down on the map, and dragging the cursor.
When you're ready to lay down the final point, move your cursor to the place where you want the last corner of the shapee and double click. This "closes" the polygon.