The Rotate - 2 option in the Iterative Alignment dialog box (Insert | Alignment | New | Iterative button) is used in conjunction with at least two features selected from the Feature List box. This set of features rotates the defined axis of the workplane to the features, fitting a line through the features.
At least two features need to be used to rotate.
If no features have been marked, the alignment uses features from the LEVEL section. (The two features used from the LEVEL section are the second and third from last feature.)