The tolerance option controls the luminance level of the image. As the magic wand tool works best with colors, tolerance level increases or decreases the value of the color you choose. So for the selection process using the magic wand tool, you will have to set the tolerance level according to the color of the area you want to select.
By default, the value is set to 32. So if you increase the value, the luminance level of the color will increase, and if you decrease the value, the luminance will decrease. For example, if you choose the tolerance level to 50, the tool will select areas with 50 shades higher and darker.
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