Hotspot Shield: What does it give me?

I am curious for an explanation to someone that doesn't know networking very well. If I use the Hotspot Shield VPN on my iPhone what protection is it giving me?

Is it just encrypting data so that someone on the same network can't see it? Is doing anything to hide my identity on the access point? What else?

it basically hides your IP address from the site\service you're using for privacy, but it's also useful for us Canadian users to have a fake american IP address to use services like Hulu and NBC.com's video streaming.
more info here: Get Behind the Shield! Hotspot Shield by AnchorFree

Will it protect my torrent download activity from my internet provider? If not, what's a good free app to use?