It replaces each “static mesh component” with an “instanced static mesh instance”, as confusing as the instanced static mesh stuff is. Once it has found every static mesh in the actor it will then destroy that actor and move onto the next 1.
I did a test with it and spawned 10 000 houses, each with 4 meshes and with all of them in view I had an fps of 1-5fps, click the button and after about 10-20 seconds of converting it jumps back up to 60fps.
Since once you have them as instances you can’t actually do anything with them I would only actually do this when you want to publish, but you can do it for everything pretty much.
Like I would run this for my road as well so that street signs etc all became instanced instead. It’s pretty much how the foliage painter does stuff really.
You can just run the instancer at begin play as well to get the optimization at runtime, but with that many buildings I end up struggling to move around in the editor. I think I might change it around to be based on regions. So that I can instance out a region and save it and move onto the next 1.