Sadly, the feature's name is misleading. In fact, I'd go so far as to say that it's wrong, if not an outright lie. Turning this option on just enables you to use exposure compensation — it doesn't let you do anything actually "manual".

If you enable this option, the ... menu at the lower right of the screen gains a +/- icon, as typically indicates exposure value compensation. Selecting this allows you to choose compensation on a scale from -2 to +2. Exposure is still entirely automatic, and even with a value selected here will change automatically as lighting in the frame changes. You can't use this to get a constant exposure from shot to shot, or set based on external metering, or anything else you would want to use actual manual exposure for.

I don't understand why this is mislabeled, and I also don't understand why EV compensation isn't available by default. I guess it protects against newbies ruining their images by leaving it on accidentally, but there is an obvious indicator when a compensation value is selected, and EV compensation (with the same icon!) is common on pretty much all cameras at all price ranges. So, it's a mystery. And also something I'm reporting as a bug.

Note that the above applies to the Android 4.4 "Kit Kat" camera and to that app in 5.0 Lollipop. Lollipop does provide APIs allowing apps to have greater manual control, but the built-in camera doesn't take advantage of that, even with this option enabled.