Called with an active region, it will replace all spaces in that region with the character corresponding to the subsequent key press. E.g., if
cover-active-region is bound to
C-c /, then
C-c / h will replace all spaces (not newlines or anything) in the active region with the letter
I suppose this is a simple extension of a command that replace all characters in active region (not just whitespace).
In any case, I'm sure there is a function or idiom for this in Emacs, but I can't seem to find it.