This tool is available from the Layer menu, or by right clicking on an image or elevation layer in the Overlay Control Center and choosing Create Area Features From Equal Values in Selected Layer in the Layer sub menu. Data downloaded from online sources must first be exported and reloaded from file before using this tool.
The Create Area Features from Equal Values tool allows for raster to vector or elevation grid to vector conversion of data based on the pixel values. For imagery this may be RGB values or palette indices. For elevation data, this is elevation values.
Layer Description defines the resulting layer name.
Value Attribute Namespecifies the name of the attribute where the pixel value will be copied for the resulting vector features. The default attribute names are COLOR or ELEVATION depending on the type of raster data. Leave this value blank to not create an attribute containing the raster pixel value.
Area Classification specifies the feature type of the resulting vector features.
For imagery data, this section specifies how to group RGB values into area features. Based on the 8-bit color range of values, specify the range of shades to include above and below the given color value.
Check the Save Palette Indices Rather than RGB if Available to create attribute values with the palette index number rather than RGB.
For elevation data, specify the match distance to group elevation values by. Like with color fuzziness this value is measured above and below output attribute value. For example match distance of 10 would generate elevation areas with a 20 meter elevation range and an attribute specifying the middle value of the elevation range.
Create Areas for All Encountered Color Values will create area features for the entire image area. Use this setting with caution with standard images, as it can take a while to run. It is recommended to test this first on a smaller area using the Draw a Box option on the Area Bounds tab.
Only Create Areas for Selected Colors creates area features for only color choosing using the select button, and including any nearby shades in the Maximum Match Distance. For extracting vector features from imagery, this is the recommended setting for files that have many shades of colors. Determine the approximate RGB value in the image first by mousing over it with the cursor and viewing the value in the bottom bar, using the Pick Color from Map option, or first calculate the color statistics within a selected area.
This image is set to create area features from the gray pixels in the image. The average RGB values of the road were determined, and then specified in the color picker. A maximum match distance has also been set. 
The result is area features tracing the pixel values that matched the color criteria. This initial result can be improved through further digitizer tools to reshape and combine the areas. Suggested further steps include using Simplify and Smooth tools to reshape the feature. Other useful steps may be Select
All Area/Island Smaller than Size… to delete smaller areas that were incorrectly selected, or Skeleton Lines to convert the areas to line features.
The above image is a palette image. Since there are only specific colors in the palette, areas can be created for all encountered values with a Maximum match distance of 0. To extract only certain features such as the river, roads or contour lines, choose to create for only the selected palette color. 
Further digitizer tools can be used to combine and reshape the resulting vectors. They can also be split into separate layers based on the COLOR attribute.
The above elevation grid is run with a Maximum Match Distance of 10 meters
The resulting area features inherit the colors of the elevation grid, and represent elevation ares in 20 meter ranges.