Yes that is your backwash valve and when you get a pressure rise of 5-8 lbs then you want to backwash the filter until the water runs clear. Basically you are reversing the flow and sending all the gunk that is caked on your grids out in the yard. Once the water runs clear shut down the equipment again, set the valve back to filter, start up the equipment again and then add like 75%-80% of the required DE in the skimmer with filter/pump running. Check that the pressure returned to normal and you are all set.
** When it is REAL nasty you may have to open it up and actually clean the filter elements but if the pressure drops to normal and does NOT immediately rise back up you should be fine with backwashing.