If your website has a “contact us” or “Sign me up to your newsletter” form it is possible that a spammer could use it to send spam from your server. This takes up your bandwidth, leaves your ISP with a mess to sort out (and for which they might charge you) and could in severe cases end up with emails from your domain being blocked from sending email.
Its a formula - a way to take a message of an arbitrary length, and create a 128-bit "fingerprint" or "message digest" of the message. MD5 is a way to verify data integrity. On these forums, it comes up fairly often in discussions about storing user passwords and other sensitive data.