It automatically raises your price above a competing offer, up to a cap. It is uncommon in Alberta, and we generally advise against it.
An escalation clause says, in effect: I offer this price, and if you receive a higher offer I will beat it by a set increment, up to a maximum. The idea is that you never lose by a small margin and never pay more than you had to.
It is common in some American markets. It has never become normal practice in Alberta, and that matters more than whether the logic is elegant.
An escalation clause solves a problem you can solve better by simply knowing your number and being willing to say it.
Decide your genuine maximum before offers are presented — the number you can live with paying, and the number you can live with losing at. Then submit it as a clean figure, and strengthen everything that is not price: a meaningful deposit, a possession date that suits the seller, a short and well-prepared condition period. See competing offers in Calgary for how those pieces are weighed.