The "Exclude" button appears once you have selected a filter. It allows you to search for all documents which do not correspond to the last active filter you selected, that is to say to the currently strikethrough filters. It allows to display all documents but the one(s) which correspond(s) to the currently strikethrough filters.
For example, this configuration makes you see only "PDF" and "Word" documents.
Now if you click on "Exclude", this configuration makes you see all documents but "PDF" and "Word" documents.
This "Exclude" functionality can be used in multiple filters at the same time. Just click on as many "Exclude" buttons as you need.