Live Reverse Engineering (or as we call it now, the “Object Explorer”) can be found in File Menu | Reverse Engineering | Connections | Open Object Explorer.
Basically, when you open Object Explorer, you are able to browse through objects in your database and simply drag and drop them right into your model. For example, you can select multiple Tables and drag and drop them onto the Entities folder in Model Explorer. These objects will be reverse engineered and added into your model.
Note that this feature only works if your database platform and version is identical to your model database platform and version. Also, you cannot reverse engineer objects already existing in your model - you won’t be able to perform the drag and drop.
For more information about this feature, try searching for Live Reverse Engineering in the application Help.