Obfuscating simply makes code hard for others to read and follow. This is not to be confused with encryption which uses ciphers and keys to make the data unreadable to users without the correct information.
Obfuscating certain snippets of your code will help make it difficult for potential hackers to reverse engineer your site and find security potholes. It can also be used to help prevent people from stealing and editing your code (as it’s often not worth the hassle).
There are down sides to obfuscating code. Depending on the level of obfuscation it may introduce a performance hit on your site. Lower level obfuscation, like variable name randomisation doesn’t add a performance hit, as computers don’t care what variables have been called, however encoding numbers and strings will.