When you specify this option, PGPMenu will ask you the name of the keyfile you would like to add to your keyring. PGPMenu will then have PGP add the keys contained in that keyfile onto your keyring.
When the keys have been added, PGP may ask if you want to certify, or sign any of the keys. You should do so only if you have complete proof that they key you obtained actually belongs to the user from whom it claims to be.
If all goes well, you should have the new keys on your keyring and you should be able to use them for other PGP operations.
When the keyadd finishes, PGPMenu will wait for you to tell it to return to the key management menu.