Edit in Photoshop

This option allows you to edit the selected photo in Photoshop. It will open Photoshop automatically. When you have finished select 'Save" (Not 'Save As') and a new Photoshop file will be saved next to the original file, named appropriately, linked in the Lightroom Catalogue and opened automatically in Lightroom.
Open this by selecting the image and going to the Lightroom Menu > Photo > Edit In > Edit in Adobe Photoshop. Alternatively right click on the image and select Edit In > Edit in Adobe Photoshop.

This combines the RAW image with the Lightroom adjustments and sends across a flattened rasterised file.
This does the same as number 1 except that Lightroom adjustments are not made.
The original file is sent to be edited but no Lightroom adjustments are applied. Not recommended as you never want to alter your original RAW file.

A better option than using this feature is to Open in Photoshop as a Smart Object. This takes through the RAW file and Lightroom adjustments in such a way as to retain all the data and allow the Camera RAW Filter in Photoshop to be linked, so that a change in one is reflected in the other. This is a better way of Linking Lightroom and Photoshop.

Lr Edit in Photoshop Menu