This template gives you a way to later prove that you are the person who was in control of your account on the day this template was placed. This is done by putting a code (called a "hash") on your user page so that, in the event that your account is compromised, you can convince someone else that you are really the person behind your username.
The intended use of this template is to help in the hopefully unlikely event that your account is compromised. If you published your real-life identity, then that identity could be used to reestablish contact with you if your account were compromised; keep in mind, in this scenario contact could not be established with you through your account, since it may be under the control of someone else. However, many Wikipedia users do not disclose their real-life identities, or disclose little enough of them that it may be difficult to establish their identity.
This is not a replacement for having a strong password, nor for registering an email address for your account. You should still do everything you can to prevent your account being compromised, including using a strong password and remembering to log yourself out when using a computer to which others may have access. If you have one, it may also be helpful to post your PGP public key. But even with the best of precautions, your account could become compromised, for instance, via a trojan horse or a brute-force attack on your password. This is intended to be a last resort.
The idea is to use cryptographic hashes; you choose a secret string known only to yourself, put it through a one-way hash function, and publish the result somewhere. It is infeasible to determine the secret string corresponding to the hash; hence, an attacker compromising an account presumably would not be able to supply the secret string.
Italicized text should be replaced with appropriate input, or its parameter should be removed. Parameters are represented by "parameter=value", and separated by vertical bars |.
For example, if your hash is "1eb00f7cdeaa38f5e9aec8f065b956acf94d416a4a40c1fb5d1dd23b857ba6fe" using SHA-256, and you want a light orange box with a black border, use the following code: