A MD5 checksum is a 128-bit value used to identify files (almost like the fingerprint of a file). You might have noticed a checksum value when downloading files. When you download a file, how do you know that you have the same file as indicated on the website you downloaded from? Instead of trying to compare file sizes or date created/modified timestamps, you can calculate the MD5 checksums and compare.
For example, say that there is a website that allows you to download Software A. The website gives you the MD5 checksum of Software A. Bob downloads Software A and injects some malicious code into it. Bob then redistributes his modified software, but still calls it Software A. If you take the MD5 checksum of Bob’s modified file, you will find that it is different than the MD5 checksum that was originally listed on Software A’s website. In this manner, you will know that this is not the proper file.
It is important to note that in certain cases, researchers have found that two different files have the same MD5 checksum. This makes the MD5 algorithm vulnerable to Collisions.