The import/export tool is very useful within Magento. Being that there is limited documentation on the topic, I thought I would add my .02.
Basically you can use the import/export tool to do mass imports of products. It makes it much easier if you would like to add 50 products all at once, you would just create a csv or xml file with the matching fields for the database, add your information and then use the import tool to import the products. You can retrieve a sample csv or xml file, but doing an export.
Doing an export is very easy, and allows you to export all of your products out of your website. You might want to do this, if you are moving your website or need to reinstall or upgrade your website, and need to get the products out.
Its a very useful tool.