Documentation states:

Reset component state: Reset to original component state, as set on the canvas

Setup:

1. 
   

   Icon button component using a swap instance property for select the icon from a separate library.

   
   


2. 
   

   Place component on canvas and change the icon.

   
   


3. 
   

   Open overlay on click and allow closing overlay when clicking outside of it.

   
   


4. 
   

   Enable “Reset component state” in state management.

   
   

Behavior:

After clicking outside of the overlay to close it, the icon button component property for the icon gets reset to the original value configured in the component and NOT as expected to the value configured on the canvas.

In this case, the canvas and the component live in the same file.