With Target CPA, you tell Google what you're willing to pay, on average, for a conversion. Google then bids higher on auctions likely to convert and lower on those that aren't, aiming to hit your target across all conversions. It's set as an optional target within the Maximize Conversions strategy. Some individual conversions will cost more and some less; the target is an average.
Setting the target too low starves a campaign of volume, while setting it too high wastes money. The best practice is to start near your recent actual CPA and adjust gradually, since large jumps can restart the learning phase. Target CPA works best when all tracked conversions are roughly equal in value; when they're not, Target ROAS is usually the better fit.
Example
A law firm averaging $210 per consultation sets a $200 Target CPA, and Google adjusts bids to hold the average near that number while maximizing consultations.
How Sloss Digital uses it
We set Target CPA from each client's real economics, start close to current performance, and tighten or loosen it in small steps as data builds.