The sound of a chord, its character, is defined primarily by its root and quality (i.e. Dm7). Very important as well are a chord's inversion and voicing. To understand inversions we start by bunching the chord tones as closely together as possible and then beginning with the root list its notes in a vertical manner one by one.
Note: ChordLab always displays all inversions simultaneously, but only the current configuration appears in full black.
The Dm7 chord shown above at the very left of the staff has its notes grouped as closely as possible and D as its root or lowest cnord tone. This is called root position - simply because we start building with the root (D). The other notes F, A and C follow going up vertically and everything looks evenly spaced. This chord has a very particular sound in root position. If we were to insert an octave between any two of these notes, we would still consider the chord to be in root position - another where we toss out octaves.
To create the first inversion (of a total of 3 possible inversions) of our Dm7 we simply move the lowest note of the chord up by an octave. The picture above shows that with an arrow. Thus the Dm7 chord in first inversion begins with an F, followed up by the notes A, C and D. This chord sounds quite different. To follow along with ChordLab, just press the green line under the second chord from the left to highlight the 1st inversion and then press the space bar on your keyboard to play it.
Repeating this process of moving the lowest chord tone up by an octave renders the next two inversions, called 2nd and 3rd inversion. If we were to perform this "octave transposition" on the 3rd inversion, we would we back where we started with Dm7 in root position, but an octave higher. We know by now that octaves don't count, so this would be the exact same chord as the one we started with. For any 4-note chord we get one root position and 3 inversions. For any triad (three note chord) we get a root position, but only 2 inversions.
The Inversion Strip in ChordLab is a greenish segmented line below the notation display. The strip highlights the selected inversion with a somewhat thicker line than the others. Also note the inversion display in the top right corner of the interface.
In addition to the Inversion Strip inversions can be adjusted using the inversion arrow buttons in the right pane of the main window or the Inversion menu. The latter defines all keyboard shortcuts including also keys to move to the previous or next inversions.