Hello,
Clicking this button in the UV editor hides all unselected polygons/vertices in the UV editor. The problem comes when you unhide everything by clicking the button again and collapse the modifier stack and return to "Editable Poly". The vertices will remain hidden and you have to then manually click the "Unhide All" while in the "Vertices" selection mode.
I feel that once you click the "Display Only Selected Polygons" again in the UV editor once you are done, it should automatically unhide everything, including the vertices.
Cheers,
Milos
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