It's a facility in the WebIF. Browse to the recording in question using WebIF >> Browse Media Files, then click the OPT+ ("extra options") button associated with it (on the right of the listing). The "Set Thumbnail" item on this menu provides access to the various options available.
I'm not sure (because all my recordings are decrypted automatically), but it may be necessary to decrypt a recording before the thumbnail options become available (or at the very least have decryption enabled). If you are unfamiliar with decryption, start at Things Every... (click) section 5 and follow links from there. It is also possible to select your own frame from a recording as a thumbnail, without decryption or even custom firmware - see https://hummy.tv/forum/threads/thumbnails-any-configuration.3241/#post-38027.
You mean the Humax stuff? It has direct access to the hardware decryption (we only have access via the DLNA streaming or USB copy processes). If no thumbnail exists when a recording is played, the frame at the start (or the resume point) is grabbed and used to create a thumbnail. If no thumbnail exists at the time of controlled shutdown, the first frame is grabbed and a thumbnail created.