The Rectangle tool uses SketchUp's geometric inference engine to help you place your rectangles in 3D space. The inference decisions, made by the inference engine, are displayed in the drawing area as inference lines and inference points. These lines and points show precise alignment between the rectangle you are drawing and the geometry of your model.
For example, if you move your mouse over an endpoint of an existing edge and then move away in the direction of an axis, a dotted inference line with a From Point tool tip will appear.
This tool tip indicates that you are aligned to that end point. You can also use a From Point inference to draw rectangles vertically or at non-orthogonal planes.