Estimating your opponent's hands I assume means guessing what range of holdings he would play that way. For instance, if I tight player raises under the gun, you can narrow down his hands to just a few.

It has immense value, in fact, it's the hardest part of the game. Figuring out what to do once you've estimated someone's hand is (with a little practice and the help of a good computer program) pretty easy.

The entire game is one big war to see who can estimate his opponents' hands the best, while preventing his opponents from doing the same to him.