MD5 (and other one-way hash functions like CRC32) are designed to take in a string and convert it to a shorter string, kind of a fingerprint of the original string. Diffrent one-way hash functions produce fingerprints of diffrent lengths. But the following criteria should hold for all good one-way hash functions:

• you can not learn anything about the input string by examining its fingerprint except for the fact that it has that fingerprint
• a small change (even a single bit) in the input string should cause a dramatic change in the output of the hash function

I deal with a good bit of datacomm and file transfers. I use MD5 to identify when I have received suspect duplicate files. I keep a DB table with the MD5 values of all the files that have been transmitted to me. Whenever I get a new file, I compare its MD5 valye to those stored in the table. If the value is not in the table, I process the file and store its MD5 value in the table. If the value is in the table I set the file asside for special handling and notify an operator.

If you really want to learn about exactly how the (and other hash algorighms) work I recomend checking out Applied Cryptography by Bruce Schneier.

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