Slip days are used to compute how many days a student is late for a submission in case there is a deadline set. When a student is graded, the late penalty (if set) will be calculated accordingly.
You can set a total number of slip days for the entire class in the course Settings page. If you also want to give students the ability to use slip days on their own, you can also set the flag "Students allowed to use slip days" ON.
Please make sure you do a save after changing these settings.
If the number of slip days for a course is greater than 0, then another option will appear for each assignment under option “Max slip days” and you can set how many slip days can be used for any given assignment.
If students are allowed to use slip days, they will see the option on their assignment page under Actions menu to 'Use slip days'.
You can also compute the slip days for any assignment via Dashboard=>Control=>Compute slip days.