The postcode database - which turns a postcode to a latitude/longitude and back - is not free in the UK. In fact, it's very expensive. The Post Office owns it and sells it to various companies that make use of it for things like insurance or parcel tracking. There are however many people who'd like to use it for non-profit purposes. Say you want to lay out events like free concerts / gigs on a map and you only have the postcode... you have to buy the database.
Instead, wouldn't it be nice if it was free like zipcodes are in the US? To do this, you need people collaborating with GPS units, noting positions and postcodes. Hence this app to simplify collection of that data.
You must have an accuracy of 50m or below to be able to submit.
The data you submit goes into the public domain and can be downloaded from http://www.freethepostcode.org/currentlist