The first two points (base point, second point) determine the axis of the
principal direction of cutting. This is done in much the same fashion as
most of the Rhino commands that need a direction - Extrude (direction),
Contour, Taper, etc.
Note that you have several options for the direction here that in V4 are not
that easy to get to - you actually need to go through the motions in
picking the curve, the object to cut and then the two points before these
options become visible, after which you can set them… In V5 the command
flow has been re-organied to be more logical, and those options are
available at the beginning.
and depth cut?
Once you have determined the principal direction, you can just hit Enter if
you want to completely cut through the object (in this case there is no
second direction). If you want a partial cut, you need to give it a depth
by picking a point or keyboard entry, then you get the “second cut”
direction options which are similar to the first. then you finally get the
choice of which part you want to cut/keep…