What is Clean project in Android Studio really doing?
Simple answer it Deletes the build directory
It removes whatever already-compiled files are in your project meaning it removes the .class files and recompiles the project again.
Source is here : https://www.jetbrains.com/help/idea/2016.3/cleaning-system-cache.html?search=clean
If you want to have some fun by cleaning yourself
Open your project path using cmd (go to project path and type cmd and hit enter like below)
Then use command gradlew clean and hit enter and see what happens when it cleans
For other tasks and meet your project's Mr.Gradle use command gradlew help
Clean action, basically invoking ./gradle clean task in your application directory, which is removing all generated files, removes build folders. So basically next time you will run/build all the artifacts will be builded from the scratch and will not be reused.
More information you can find on a official gradle site
Information about android plugin
DSL reference for Android plugin