Option Selects are a way for you to input a response to several situations without actually guessing exactly what they are going to do.
Can't really say all that much on it, but it's there to make your life easier, as opposed to a technique you have to go out of your way to learn.
The section at the bottom of this page explains one of the most useful ones:
http://wiki.shoryuken.com/The_King_of_Fighters_XIII/Systems/Attacking:_Throws_ThrowtechingDon't know much else beyond that, for examples, just anytime the enemy short hops towards you and you are prepared for it, you can try an option select.
EDIT: also forgot to mention this, but if you don't expect them to hit you with something before you can get into range, I think running up and pressing
or
counts as an option select. if they try to block, you'll grab him, but if they jump, you can hit them with the cl.C/cl.D which one you use depends on the character, but generally you pick the one that serves as the better anti air. This is assuming of course, there's some reason they didn't try to hit you before you get to close range, maybe empty hop, or while they are waking up.