The most obvious use for the app is reading small text, but it will work on any object. The only limitation is how how close you can hold the phone to the object you are looking at before the camera can no longer focus. The focus distance will vary from device to device (e.g. it's between 5 and 10 cm or so for the Lumia 920).
This distance will have a direct impact on how much the app can magnify a given subject, but in most real-world cases it should be possible to achieve between a 5x and 10x magnification.
Reading Lens is based on Reading Glasses for Windows Phone 7. The main difference between the two apps is that the Reading Lens integrates with Windows Phone 8's lenses feature, and is therefore accessible directly from the Camera app, as well as from the app list.
Windows Phone Store description:
Based on the highly rated Reading Glasses app for Windows Phone 7, Reading Lens provides a custom camera Lens to help with reading small text. This is an app you'll use over and over again. Launch it like any other app or though the camera app.
Reading Lens can be downloaded from the Windows Phone Store. The app is currently available for free, but the developers say this is a limited time offer.