Explanation:

Box 1: Modify
Modify is used to add, update, or remove properties or tags on a resource during creation or update. A common example is updating tags on resources such as costCenter. Existing non-compliant resources can be remediated with a remediation task. A single Modify rule can have any number of operations.
Box 2: A managed identity with the Contributor role
* Managed identity
How remediation security works: When Azure Policy runs the template in the deployIfNotExists policy definition, it does so using a managed identity. Azure Policy creates a managed identity for each assignment, but must have details about what roles to grant the managed identity.
* Contributor role
The Contributor role grants the required access to apply tags to any entity.
Reference:
https://docs.microsoft.com/en-us/azure/governance/policy/concepts/effects
https://docs.microsoft.com/en-us/azure/governance/policy/how-to/remediate-resources
https://docs.microsoft.com/en-us/azure/azure-resource-manager/management/tag-resources
https://docs.microsoft.com/en-us/azure/governance/policy/concepts/effects#modify