The "Regenerate All Thumbnails" actually does what is said on the button.
Sometimes, when you edit materials and scenes often, the thumbnails are no longer reflect the actual content of the scene/material (especially older builds of XPression showed this behaviour). When you click "Regenerate All Thumbnails" each scene/material is checked and the accompanied thumbnail will be regenerated according to the current content of the scene/material.
You shouldn't need the button, but just in case the thumbnails are incorrect you can use it.
#XPression