$\psi(t)=\mathrm{tanh}(\alpha t)$ is a nonlinear transformation.
For $|\alpha t|$ close to $0$, the function is actually an approximately linear function of $t$, with $\psi(t) \approx \alpha t$.
By the time $|\alpha t| \ge 2$, the function's nonlinearity is very apparent, almost not really depending on $\alpha t$ at all, but just the sign of $\alpha t$, so $\psi(t) \approx \mathrm{sgn}(\alpha t)$.
In summary, $\psi(t)=\mathrm{tanh}(\alpha t)$ is a nonlinear tranformation with a "softer" transition than the basic $\psi(t)=\mathrm{sgn}(t)$ nonlinear transformation.