no, it simply moves the center of the cutter along the line given

yes, by half the cutter diameter on each end.

from the help (big blue question mark in toolbar, then click 'toolbar')

Fold Tool - This tool is used to define a fold line. The use of a fold line is to create a crease, so a sheet of foam can be folded or bent to form 3d shapes. Or by using a series of stepped depth fold lines, create a hinge line for a model airplane control surface.

It automatically selects a single edge. Press the ["Shift" key], if you want all connected edges.

Use the ["End" key] to toggle between short and wide mode. When hovering over an edge, the short mode shows a pink color preview. Wide mode shows a darker red/purple preview color. Short and Wide mode status is also shown on the bottom status text. The default short mode will shorten both ends of the edge by a small amount. The main reason is to break contact and stop the possible creation of an extra face and loop, which could confuse SketchUcam. Wide mode will act normally and not offer this protection. But you can use wide mode, if say you want a connected chain of edges.

Use the ["Left Arrow"]["Right Arrow"] keys to scroll through the preset depths: [25%, 50%, 75% & 100%]. This will result in the cut depth, as a percentage of the material thickness. You can see the current depth factor in the VCB (lower right hand corner in SketchUp).
Use the ["Down" key] to set the depth back to the default of 50%.

Note: You can type custom depth values into the VCB, using your keyboard. The value is not accepted, until the "Enter" key is pressed. Then the % suffix will appear with the VCB value, which indicates the value is now set. Max value allowed is 140%.

Center line Tool - This tool is used to define a center line cut on a SketchUp edge. The common use of center lines, is to cut a shallow graphical design or slot. If you are able to draw the necessary pattern of lines to form a pocket, you can also use center lines to cut out the pocket. Pocket milling is when you cut out shallow openings, that do not penetrate to the other side.

It automatically selects all connected edges. Press the ["Shift" key], if you only want a single edge.

Use the ["Left Arrow"]["Right Arrow"] keys to scroll through the preset depths: [25%, 50%, 75% & 100%]. This will result in the cut depth, as a percentage of the material thickness. You can see the current depth factor in the VCB (lower right hand corner in SketchUp).
Use the ["Down" key] to set the depth back to the default of 50%.

Note: You can type custom depth values into the VCB, using your keyboard. The value is not accepted, until the "Enter" key is pressed. Then the % suffix will appear with the VCB value, which indicates the value is now set. Max value allowed is 140%.