It allows users to add their own resources to minecraft. While this would be possible using resource packs these resource packs would be visible in the resource pack window (Which the resources added by this mod aren't) and you can also just add resources to a simple folder which is easier then repackaging the resource pack every time.
After your first run with this mod installed you will notice a folder called "resources" created in your main minecraft folder (where config,saves etc. are located). That is the place you will be adding your resources to.
In case you don't know what a resource location is it consists of a resource domain and a resource path. With mods the resource domain is generally the mod id so "randomthings:textures/blocks/advancedFluidDisplay.png" refers to a texture of my Advanced Fluid Display. The vanilla resources are located in the "minecraft" resource domain ("minecraft:textures/blocks/dirt.png"). If a mod you are using now requires you to enter a resource location for something (For example Custom Main Menu or Custom Backgrounds) the resource domain will be a folder in the resources folder.
This will probably be easier to understand when you see an image:
The Resource Location for singleplayer.png would now be "test:textures/singleplayer.png".
If you don't understand this / have problems using this with a mod feel free to ask on this page. Do not ask if you just don't get what this mod is supposed to do :P.
The things you put in the resources folder can override vanilla resources but can be overridden by installed resource packs. If you want to override everything, including all installed resource packs create a new folder called "oresources" where the resources folder is, resources put in "oresources" have the highest priority, e.g. override everything else that contains that resource. The following image shows how minecraft "searches" for a resource:
By default Resource Loader will print all resource domains it has folders for to the debug log. By creating a folder called "debug" in either your resources or oresources folder you can enable additional logging. Resource Loader will then print a line to the debug log whenever it can't find a requested file.
You can use this mod in any modpack without asking first