Dotfuscator allows you to hide user strings that are present in your assembly. A common attacker technique is to locate critical code sections by looking for string references inside the binary. For example, if your application is time locked, it may display a message when the timeout expires. Attackers search for this message inside the disassembled or decompiled output and chances are, when they find it, they will be very close to your sensitive time lock algorithm.
Dotfuscator addresses this problem by allowing you to encrypt strings in these sensitive parts of your application, providing an effective barrier against this type of attack.
Since string encryption incurs a slight runtime penalty no string encryption is performed except on the parts of the application that you specify.