The LOD SOP is unusual in so far as it does not actually alter any geometry. Instead it builds a level of detail cache for the input object. The cache to be drawn is based upon the distance to the camera. Thus, a complicated object will be drawn with a lower level of detail when it is farther away.
The second input is the Rest Geometry. If provided, this is the geometry wich will be used to do the (expensive) polygon reduction, and only the points of the left input will be used.
/steppercent - Each successive level of detail will contain approximately this percentage on the number of polygons in the higher level of detail.
/distance - This is the distance from the camera at which full detail will be present.
/minpercent - The objects won't be drawn with fewer than this number of polygons.
/borderweight - The amount of weight to avoid erosion of boundary polygons.
/lengthweight - The amount of weight to favour even sized polygons.
/triangulate - Polygons can only be reduced if they are triangles. This option thus first converts them.
/tstrips - When set, triangle strips will be generated and used for drawing.
Only Affect Polygon
/polysonly - If this is enabled, only the polygonal portion of the model will be displayed at lower levels of detail. Otherwise, all types of surfaces are affected by the distance to the camera.