[Q] What does the custom recovery do? topic

I'm following the steps in the link below to root my phone:
http://forum.xda-developers.com/show....php?t=1426377

At step 3, I did get a successful message (I can't remember the message now, but, it seemed successful), but, what exactly does it do? Should I have an extra recovery file on my computer or phone? I don't see any new file created on my computer. So, I just want to make sure it worked properly before moving on.

Thanks.