Sometimes you will want to edit MIDI data directly from a connected MIDI device like a music keyboard or pad controller. Sometimes you will want to use the mouse. Sometimes you'll want the fine-grain control, precision and speed of entry that comes from using a custom note entry dialog.
The step entry dialog is accessed via a right click context menu on the rec-enable button, because step entry is related to recording MIDI data. You cannot simultaneously step edit and record MIDI via the track's MIDI port.
The dialog (quite closely modelled on Logic's) contains:
More or less all actions in the step entry dialog can be driven directly from the keyboard, so you do not need to keep moving back and forth from keyboard to mouse to do complex data insertion.