MD5 is a widely used cryptographic-algorithm for creating hashes from data bytes(most often represented by a string). By hashing data a deterministic hash is being created. By only having the hash the original data can not be determined, making Hashing vastly different from Encryption and Decryption algorithms.
MD5 Hashes are most commonly used for creating hashes of passwords to safely store a reference to them. However for passwords the newer bcrypt algorithm should be used, because it is more secure. It is also good to salt passwords before hashing them in order to make the use of rainbow tables to crack the password more cumbersome.