To turn planar mode on and off, click the Force Planar toggle button in the Tool Options window for the selected drawing tool. See Work with polygons, rectangles, and circles. You can also press (T). The planar icon displays when the option is on in your scene.
When drawing shapes with the planar option off, vertices and edges are placed directly onto the terrain, such as with building footprints. For nonplanar terrains, this usually results in footprints that aren't horizontal and are often nonplanar. However, in many cases, planar footprints are required.
When you turn planar mode on, the first vertex or edge you place defines an imaginary horizontal drawing plane, and additional vertices and edges are placed on this drawing plane. Therefore, the resulting shapes are always planar.
With the planar option on, when you draw a shape, the guides are projected onto the drawing plane and serve as snap targets. When the shape is finished or you turn planar mode off, the guides reappear at the original position.
When you turn planar mode on and create guides, you place guides on the same drawing plane as the edge that is clicked. Otherwise, you can create guides on different drawing planes.
Drawing on terrain can be challenging, as the relation of pointer position, terrain, and drawing plane isn't always clear. To illustrate this relation, an orange vertical line is displayed that connects the pointer position on the drawing plane with the point on the terrain that is vertically above or below. This is especially helpful when tracing features from satellite imagery while in the 3D view.