what does RunService:IsStudio() function or event do?

According to the docs:

This function returns whether the current environment is running in Roblox Studio.

This function will only return true when using Roblox Studio and can be used to add code to test your game within Studio

So you would use this in a script simply for testing purposes for perhaps an http call or a discord webhook where it would let the channel know what was a test and what was from in a game.

Here, I've included some code for a discord webhook, it will send whatever a player says into the general chat of my discord server.

By using the RunService:IsStudio() function, instead of the player's username showing up in the discord server, the word "studio" shows up. This way if it had another use, it would show the difference between a test run and an ingame run.

game.Players.ChildAdded:Wait()
local player = game.Players:FindFirstChildOfClass("Player")
local SendMessage = game.ReplicatedStorage.SendMessage
local http = game:GetService("HttpService")

player.Chatted:Connect(function(msg)
    local text = msg
	local user = player.Name
	if game["Run Service"]:IsStudio() then
		user = "Studio"
	end
	local Data = {
    	["content"] = text,--string.split(text)[2], --text
    	["username"] = string.split(text)[1],--user
	}
	Data = http:JSONEncode(Data)
	--current webhook is Divine Infinity discord server's Hi webhook
	local worked, msg = pcall(http:PostAsync("webhook goes here", Data))
	say(msg)
end)

If this answers your question as to what IsStudio() is and how you can use it, then mark it as the accepted answer.