Tapping on the button will launch the camera that shows the distance and direction to a location relative to your position. An arrow will guide you to move your phone until you're pointing in the right direction, with the final destination marked by a large floating pin. A card at the bottom of the screen will then prompt you to start your AR-guided navigation.
This system will make it much easier for folks to get started with their navigation, particularly if they exit from an underground subway station. Rather than walking a hundred yards in the wrong direction, you can simply type in your destination, click on the Live View button and spin around until your destination appears. Then, you can start walking or riding in the right direction, immediately.
The usual Live View caveats apply -- once you start walking, the AR interface disappears so you don't get fixated on your phone and walk into the street without looking. This updated Live View feature is pretty likely to arrive soon, as it's on the Google Maps roadmap, but for now it's still in beta.