its the first option.
you have to shine it in the target's eyes for ~1/2 second and they will be blinded for a few hours.
"And since its optical system can change the laser beam from a spot to a dot to a strip of light,"....
...the target area can be a dot the size of your eye, or a 'spot' the size of your whole head.
or larger. as it seems to be designed for "crowd control".
and I would imagine a 'strip of light' could be used to 'wash over' a large group of people at once.
"Its market is the police and the security forces, for potential uses in riot situations or anti-terrorist operations.
In theory, it should take less than a second to stun one's target, and is effective at distances of several hundred meters."
;D it looks like a lightsaber and works like the "Force Blind" from Jedi Knight: dark forces2 ;D