Lofted surface tool in SolidWorks is used to create a surface between two or more profiles. This is similar to lofted boss / base tool in features menu.
Start by creating a circle of 40 mm on top plane.
Now create another plane at 20 mm right above the top plane and create another circle of 20 mm in diameter in that plane
Now create a circle of 20 mm in diameter on this new plane.
Click on the lofted surface tool in surfaces tab.
Select the two sketches / profiles we have drawn in the profile section. you will the preview of the surface like
You can also add a guided curve to change the loft surface propagation. Since we do not mention any guided curve we have a straight propagation of the surface. Click ok and you will see the resultant lofted surface as below..
