This feature allows you to do something along the line of remote command shell on your Azure Websites file system. For instance, you can perform simple shell commands like "cd", "dir", "mkdir" etc. Internally, these commands are executed remotely on Azure WebSites and against its file system. If you were to "del" pr "rmdir" a file or folder, it will behave the same way as you were to FTP and delete the file manually.
To access this feature, follow the below steps.
1. Connect to the SCM endpoint of your Websites.
This feature is exposed via the SCM (Source Control Manager) endpoint as part of your WebSites. To connect to SCM endpoint, simply add "scm" between your site name and subdomain. For instance, if your site url is "mysite.azurewebsites.net", the scm endpoint is "mysite.scm.azurewebsites.net". You can browse to "https://mysite.scm.azurewebsites.net/".
This SCM endpoint requires username and password. This information is available in your site publishing profile which you can download from Azure Portal Websites QUICKSTART or DASHBOARD (the username is usually your site name prefixed with "$" and the password is a long cryptic one). By the way, if you happen to setup git publishing for your site, you can also find this credential and URL on your site CONFIGURE tab under "deployments" sections.
Browse to SCM endpoint should land you on this page.
2. Launch the Diagnostic Console
Click the "Launch" shown in picture above should open the console.
Now, you can experiment by typing "dir" or "cd" commands. The Azure Website file structure is described here. Enjoy!