Transformation, as the name suggest, performs transformation on placeholder values and/or Amy variables and is mostly used with code interpolation. See following examples for more:

${CHAP_SELECTED_TEXT/a/A/g}  - this transformation will perform regular expression replace of input text. In this case all lower *a* will become upper ones (*A*).
${CHAP_WORD-2|.toUpperCase()}  - this will insert a second word before caret transformed using native String function toUpperCase()
${CHAP_WORD-2|test}  - this will invoke method snippetTransform_test(str, component) on a snippet object. We must declare the method somehow prior first usage. This is generally the most powerful transformation since we acquire component object meaning have access to whole text-editing component and its API.