The selection filters option is used to filter the list of records contained in the linked app, this is ideal for large data sets. Setting this up is similar to setting up conditional logic on fields within an app. 

When you setup the selection filters, you first select a field in the linked app that you wish to use as a the filter (left column)

Then you will be select the operator, which can have the options of: 

This allows for creating very narrowly focused rules to help provide the user with only options that meet the criteria.

After that you may have two options, unless you use the is empty or is not empty operator, to either use a value contained in the field within the record with the record link field or a value that you will define in the final column.

Lastly, unless you use the is empty or is not empty operator, you will either have the option to select a field in the app with the record link field to serve as the filtered value:

or you will have the option of defining the value to use as the filter in a text capture field: