It burns their thread backward, undoing whatever that person has recently done. Probably only Jordan could have answered (and he may have, but I've never read of it) what level of intelligence the living things must possess to have their actions undone. Rand undoes the actions of Darkhounds, so there's some evidence it works beyond just for people. I would assume you could also balefire a dog who shit on your carpet to suddenly have a clean carpet as well. But could you balefire a mosquito to keep from getting an itchy bump?

My little tangent aside... I re-iterate: non-living things, including inanimate objects and one-power weaves, can not affect time by being balefired.