This feature give you the ability to “relate” two records in the database. It is not a “family tree” feature, and it does not link two “people”, it links RECORDS. Now that this is clear, here is how it works:

Click the Relationships tab on the Contact View screen.
Click New relationship to create a link to a different contact. A screen will come up where you can choose the other contacts and how the two are related. When you enter a relationship for one contact, the corresponding relationship (a link) is created on the related contact.
Click Edit to edit the details of the relationship.
Click Delete relationship to, you guessed it, delete the relationship.
Click Go To Relation to jump to the related record.

This tool is very useful for linking a father and grown child (students in campus), divorcees, etc. Children should be entered under the Family tab.

If you don't find this feature useful, you can disable it by unchecking the Display Relationships under Tools > Options > Custom Fields tab.