@DaveMartin has a good explanation of the basics. Watch this video for a demonstration and explanation of how shrinkwrap can be used.
Creo Parametric - Shrinkwrap Parts (youtube.com)
Link to help files regarding the option in question for reference:
To Create a Shrinkwrap Feature (ptc.com)
Surface Copying Options
▪Shrinkwrap then exclude (default)—Analyze the entire assembly to identify external surfaces. Only surfaces that belong to the selected components are included in the resulting Shrinkwrap feature (used with subsets).
▪Exclude then Shrinkwrap—Base the Shrinkwrap only on the selected components (used with subsets).