"Reverse Engineering" refers to the process of reading information about your existing database from the system catalog and creating a new Model based on them.
"Reverse Engineer into Model" allows you to add objects from the database to an existing model. You can also do this with the Database Compare feature, however, in some cases it is easier and quicker to use this feature: i.e. if you know that you want to add all tables from a certain Schema or Tablespace en masse. This feature works for "top-level" objects like Tables, Views, Types, Tablespaces, etc.. If you want to add a sub-object, like a Column or Index, you will still need to use Database Compare.
Reverse Engineer into Model will reverse engineer relationships (i.e., referential constraints) between the new tables and the exiting tables. However in some cases, Database Compare still needs to be run to import other properties that link the new and old objects.
Reverse Engineer into Model will not reverse engineer objects that are already in the model.
How to Reverse Engineer into Model:
Select Database > Reverse Engineer into Model from the menu, or select 
from the Database toolbar, to start the Reverse Engineer into Model wizard.
See Reverse Engineer for a description of the wizard pages.