Mostly, grabbing the upper arm/leg will allow you to break their shoulder or hip.
Lower arm/leg is for their elbow/knee.
Hand/Foot allows you to break their wrist or ankle.
Breaking the above locaions will render the limb more or less useless, stopping them from attacking with it (i think.) or being able to walk, if you've broken half of their legs. (or so it seems, with my... experiments with big cats.)
Grabbing them by the head allows you to gouge their eyes out, while grabbing them by the throat allows you to strangle them.
Grabbing them by the body mostly seems to work as just holding them, though, several of the locations you grab do allow you to throw them (usually to the ground before you.) or take them down (pushing them down directly before you.)
Knocking them down without breaking their legs is rather sneaky, as you can wait for them to get up, then charge at them again and keep alternating moves.
You can also use it to grab worn items (including weapons.) to prevent them being used against you, and even snatch them away. Beating an undead pike master with his own weapon is always fun.
Toady's mentioned that the system's going to be changed at some point, that, without looking at his dev/bloat lists, i can only assume means that the menu will be changed so have you work by the limb you want to use and the part you want to grab. in turn, not all in a list at once. And there's the promise of 'dirty' moves, he mentioned too, such as slitting your foes throat. That one i'm looking forward to most. I mean... err..
I hope that helps you some.