The Wrap toggle, in the Text Settings of a text element, controls what happens when the text is wider than its box.
- Wrap on: the text breaks onto new lines to stay inside the box, and shrinks to fit if it still runs out of room.
- Wrap off: the text keeps the line breaks you typed and never breaks on its own; instead the whole text shrinks so it fits the box.
Either way the text stays inside its box. The difference is how it gets there: wrapping flows long content onto more lines, while no-wrapping shrinks it to fit. That is what keeps a design tidy when the content comes from a text input field and you do not know in advance how much your users will type.
In both modes the text starts at its Max Font Size and only ever shrinks from there, never larger.