These commands select which exercises are to be printed, amongst those that are provided later in the file. I think what the author of the package meant with this sentence is that they can prove useful if you want to have all your exercises in one external file, and select which you want to print from that chapter. I tried to build an example below.
Example : the main file
\documentclass{article}
\usepackage{exercise}
\begin{document}
Here are some short exercises :
\ExerciseSelect[type={short}]
\begin{Exercise}[type={short}]
Prove that $1+1=2$.
\end{Exercise}
\input{exos.tex}
\ExerciseStopSelect
\vspace{1cm}\hrule\vspace{1cm}
And now a longer exercise :
\ExerciseSelect[type={long}]
\input{exos.tex}
\ExerciseStopSelect
\end{document}
Example : the file exos.tex
\begin{Exercise}[type={short}]
Prove that if $a=b$ and $b=c$ then $a=c$.
\end{Exercise}
\begin{Exercise}[type={long}]
Prove that $P \neq NP$.
\end{Exercise}
The result

\input, as I understand it. – T. Verron Nov 25 '12 at 18:51\ExerciseSelect-like commands are designed to filter which exercises are to be typeset, and which are to be left out. – T. Verron Nov 25 '12 at 18:56