It's used to extract Crossfire's .REZ format files. Since 2.0 there are new .REZ files which cannot be extracted using this tool. Source based on LithTech's RezMgr.
The cfrezformat.dll is also located in your Crossfire folder and is called pack_cf_{00}.dll.
Original post can be found here: http://www.mpgh.net/forum/showthread.php?t=1063449