This function saves the current transformation settings on the stack so that you can restore it later if you need to. You can restore it with the popmatrix function. For example, if you run this code:
// save the current transformation matrix
// translate this object
swf_definetext(3, "Hello", 1);
swf_translate(50, 50, 0);
// reload the last saved transformation matrix
Only the text "Hello" will be transformed to that location on the animation. At first when I started using this library I didn't know what this did, but this is what I've found so far. It can be very useful in animation.