The rollback activity will remove the input object from the database if it's new or reverts member changes if it's changed.
The only real use for this activity is as replacement for the standard "Cancel" button (when using the standard "Cancel" button exactly this behaviour will be executed). A reason to replace the standard "Cancel" button is to add behaviour besides performing a rollback.
In addition to what arjen says, it reverts all changes untill the last time the object was committed. If you do a rollback on a new object it was never committed before so the object will be remove. If you rollback an existing object all the changes will be undone untill to point you have last committed the object.
Another example of using the rollback action is for custom error handling if you use custom without rollback because you have created a few objects you don't want to remove but you do want to revert the changes on 1 or 2 object you can use the rollback action on them.