With a material orb in the tooltip, pulling the trigger will apply the material to whatever you're pointing at. If the target has multiple materials, only the first material is affected.
If the tooltip is empty, pressing secondary will create a material orb based on the first material of the target object and automatically place it into the tooltip.
Grabbing at the tooltip while it has a material orb in it will pull it out of the tooltip.
Releasing a material orb on top of an empty material tooltip will put it into the tooltip.
If the tooltip is empty, you can only create a new material.
With a material orb stored in the tooltip, you can also duplicate the material or pull up an inspector window to edit it. You can also convert the material into another type of material, producing a new material orb in front of the tooltip and replacing all instances of the original material.