Click on the button and choose Estimate or Invoice. After you choose a popup will be shown with the preview info also with the parsed items which are auto inserted to the estimate/invoice.
When you are satisfied from the result click Save.
After converting the proposal will be auto marked as accepted (if is not already marked as Accepted).
If the proposal is related with some lead which is not converted to client you will need to convert first the lead to client and then get back here and convert the proposal to estimate or invoice.