This way, you can upload one image and WordPress will automatically resize it to all of the various thumbnail sizes used throughout the theme.
More info here: Post Thumbnails
To set a post thumbnail, go to Posts > Add New or open an existing post in editing mode. Locate the “Featured Image” module and click on “Set Featured Image”. The Media Manager will now appear, upload your image and click “Set featured image”.
Regenerate Thumbnails allows you to regenerate the thumbnails for your image attachments. This is very handy if you’ve changed any of your thumbnail dimensions (via Settings -> Media) after previously uploading images or have changed to a theme with different featured post image dimensions.