It's an ADC, or analog-to-digital converter. It does just what the name implies: converting analog signals into digital ones. Analog signals are electrical voltages. Digital signals are a series of 1s and 0s. Something is needed to turn one into the other, and thats the ADC.
Any type of digital recording medium uses ADCs (and DACs - digital to analog converters). Some ADCs are of a higher quality than others. Apogee has a reputation for making very high quality ADCs, far better than those you might find on a prosumer grade soundcard like a M-Audio 1010 or Digidesign 002.
They're used in a recording chain by running the analog signals you would generally run into your computer interface into the Rosetta instead. It will convert those signals to digital signals, which it outputs on a digital output like ADAT Optical or AES/EBU (I believe its the AES/EBU in this case), which will then connect to your computer interface. In a nutshell, you are using the Rosetta's higher quality converters instead of the interface's lower quality converters.
That's just a bare bones explanation of using outboard ADCs and DACs (any, not just the Apogee Rosetta).
