Actually, in Internet Explorer this option is called InPrivate Browsing and when it's activated, it prevents your browsing history, temporary Internet files, form data, cookies, and user names and passwords from being retained by the browser. From the moment you close a window with InPrivate Browsing enabled, all that you have visited will be deleted (history, cookies, etc).
Note: This option doesn't completely hide you. It's good for local computer, but the ISP might see what you have visited.