MD5 stands for Message Digest algorithm 5, it replaced the old MD4 standard. The way MD5 works is that it takes a block of data and returns a fixed size hash value. It can be any data or any size but the resulting value will always be the same 32 digit hex.
Because the resulting code is always fixed, this becomes very useful when comparing or validating files after these have been transferred. After downloading large files you can use the hash value to verify the file you have downloaded is not different to the original one.
The way you can do this is by generating an MD5 hash (or MD5 check-sum) for the intended file or original source. After the file has been transferred, generate an MD5 for the downloaded file and compare these two hashes and if they match, that means the file downloaded is exactly the same as the original