The Architecture Tool is used to create Blueprints for buildings, and works using a simulator where you can place walls, doors, windows and roof segments inside a 3D editor.
In-game, the Architecture Tool is an onscreen design mode. However, the Chronicles of Elyria dev team have stated that they may release the tool as a standalone version, letting players design buildings they wish to use in-game before the official game release.
If you're familiar to playing The Sims, then you'll see that the method of construction uses a similar method, whereby you first allocate the size of the building and then build up the walls from there, adding in any windows, doors and a roof as you go.
From the screenshots released by SouldBound Studios, it would seem that you may either start a Blueprint using a pre-defined structure example (such as a basic square or rectangle building) or start from scratch placing every wall yourself to create more custom looking designs.
Once you've finished designing the structure, you can convert the design into a Blueprint, which can then be used to build the structure yourself or pass/sell on to another landowner.