Terraformer removes obstacles for construction on cells – those can be Lakes, Trees and Rocks. After the terraformation have been completed the Terraformer self-destroys and you can construct buildings on the freed cell.
Terraformation takes some time. If you point at a Terraformer you will see how much time left until the terraformation ends in the pop-up window. The higher Terraformer’s level is the faster terraformation ends.

Knights / Elves / Demons / Drow

Terraformation time
1 0 5000 800 20 0 4 days
2 0 2000 500 0 0 1 day

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