It is for merging the contents of /etc/passwd and /etc/shadow on a system with shadow passwords (like Solaris). It inserts the encrypted password from /etc/shadow into its proper place and prints the result.

It could be useful for generating a full password file that you could use with Crack, for example.

I'm not sure why the title has the "master.passwd.in" as a third argument. I don't see how that gets used.