The Interactive Histogram Stretch tool can be found on the Image Analysis window. It allows you to set the minimum and maximum histogram values for each band. By adjusting the tails of the histograms you can adjust how the curve of the histogram will be stretched across the display.
Why would I use this?
If the tails of your histogram are far from minimum and maximum values (of the bit-depth range), your image may not be optimally rendered. Adjusting the minimum and maximum value with the Interactive Stretch tool allows the image to be rendered with more contrast between the displayed pixel values. This will hopefully allow you to see more detail in your data.
The image on the left shows the default histogram. As you can see the pixels only cover a small portion of the bit-depth range.
The image on the right has the has its minimum and maximum adjusted; the dotted arrows are no longer at 0 and 255. We have now moved them to only encompass the areas where the histogram exists. Since we are only concerned with a small portion of the histogram, we are able to better contrast stretch our image.