This page is just a simple way to obtain an encrypted password. It uses PHPs md5() function to produce a one way hash ("scramble") of the password you type in. How is this useful ?
Well, if you have a password protected site, you probably store the passwords in a database or in an xml or text file. If your site gets hacked, or your database succumbs to an SQL injection attack, your passwords may well be visible. But if they are encypted, they won't be of any use to the attacker.
The hash function is a one way operation, and further more a given input will always produce the same output hash. It will encrypt your password, but it's not possible (in any reasonable amount of time) to reverse the process and figure the password from the hash. To use this scheme, you encrypt your password, and store it in your database. When the user types in a password at the log-in prompt, their entry is hashed and compared with the hashed password in the database. Simple
Please note - this does not release you from the responsibilty of producing a secure password.