The average user has approximately one thumb per hand. That thumb comes in handy for a number of touchpad interactions. For example, moving the cursor with the index finger and clicking a button with the thumb. On so-called Clickpads we don't have separate buttons though. The touchpad itself acts as a button and software decides whether it's a left, right, or middle click by counting fingers and/or finger locations. Hence the need for thumb detection, because you may have two fingers on the touchpad (usually right click) but if those are the index and thumb, then really, it's just a single finger click.
libinput has had some thumb detection since the early days when we were still hand-carving bits with stone tools. But it was quite simplistic, as the old documentation illustrates: two zones on the touchpad, a touch started in the lower zone was always a thumb. Where a touch started in the upper thumb area, a timeout and movement thresholds would decide whether it was a thumb. Internally, the thumb states were, Schrödinger-esque, "NO", "YES", and "MAYBE". On top of that, we also had speed-based thumb detection - where a finger was moving fast enough, a new touch would always default to being a thumb. On the grounds that you have no business dropping fingers in the middle of a fast interaction. Such a simplistic approach worked well enough for a bunch of use-cases but failed gloriously in other cases.
Thanks to Matt Mayfields' work, we now have a much more sophisticated thumb detection algorithm. The speed detection is still there but it better accounts for pinch gestures and two-finger scrolling. The exclusion zones are still there but less final about the state of the touch, a thumb can escape that "jail" and contribute to pointer motion where necessary. The new documentation has a bit of a general overview. A requirement for well-working thumb detection however is that your device has the required (device-specific) thresholds set up. So go over to the debugging thumb thresholds documentation and start figuring out your device's thresholds.
As usual, if you notice any issues with the new code please let us know, ideally before the 1.14 release.