The ‘Clear Scrollback’ option on the system menu tells PuTTY to discard all the lines of text that have been kept after they scrolled off the top of the screen. This might be useful, for example, if you displayed sensitive information and wanted to make sure nobody could look over your shoulder and see it. (Note that this only prevents a casual user from using the scrollbar to view the information; the text is not guaranteed not to still be in PuTTY's memory.)
The ‘Reset Terminal’ option causes a full reset of the terminal emulation. A VT-series terminal is a complex piece of software and can easily get into a state where all the text printed becomes unreadable. (This can happen, for example, if you accidentally output a binary file to your terminal.) If this happens, selecting Reset Terminal should sort it out.