how to interpret a hierarchical clustering in the heatmap in the picture bellow?
This type of plot is refereed as Double Dendogram or Coloured Heatmap.
As seen in the code you have used Single Linkage Method for clustering.It yields clusters in which individuals are added sequentially to a single group.
From the example we can see that label dia2,ht and ob belong to one group but ht and ob are more correlated with each other.

I am not sure what exactly the heatmap does

The color of a cell is proportional to its position along a color gradient.
Heatmap is helpful in finding the correlation coefficient. It can helps us to visualize the difference in value within clusters. It's more like a color representation of value.