The Python Doc states:

Frozen modules are modules written in Python whose compiled byte-codeobject is incorporated into a custom-built Python interpreter byPython’s freeze utility. See Tools/freeze/ for now.

http://docs.python.org/library/imp.html#imp.init_frozen

I don't get it. What is the freeze utility? How can it be used? Why would it be used?

This link explains what the Python Freeze utility is in detail: http://wiki.python.org/moin/Freeze

In a nutshell, it creates a portable version of a python script that carries its own built in interpreter (basically like a binary executable), so that you can run it on machines without python.