Android had a slight security snafu the other day, so it's no real surprise that Privacy Blocker exists. What does it do? Basically, the app scrambles personal data, should a malicious app decide to send it somewhere it doesn't belong.
For instance your phone number, whatever it is, becomes garbage. 5558675309, or something. The app does this by first identifying which apps are snooping and sending information. Then it "fixes" this issue by replacing the data with hard-coded fake data like the 555 number above. Alternatively, a use can make the garbage code whatever they want. HOWNOWBROWNCOW, etc.
Beyond that, the technical stuff, via Brook Jordan in a tip over at Boing Boing:
What it's doing is pretty damn impressive to be honest. The app is very processor intensive when it's "fixing" an app because it's having to decompile, parse the source and then recompile the app on the phone. It's especially processor intensive on large apps like games. The author is a custom ROM developer and a regular on droidforums.net. I'm not a member of droidforums.net and don't know him. However I tracked this thread down when I was trying to validate the app and author for myself.