"Use on panicked citizens to subdue them, and forestall attack."
The Mind Erase tool is a small beam that is used to calm down citizens. If a citizen in a colony is running around, with a yellow exclamation point over their heads, use the Mind Erase tool on him/her to calm him/her down. If a panicking citizen was scared by a crop circle, he/she will go back to investigate the crop circle, and get scared again.
The song heard when using the ray is a fast forwarded version of Pachelbel's 'Canon'
Unlike many other tools, the mind erase seems to have no range limit, and can be used on the ground even while a player's spaceship is as high in the atmosphere as possible.