In Moodle, what does the Database Activity do?

The Moodle Database Activity allows instructors to build their databases for class use. Here is a link to a collection called Database for Databases

Moodle Documentation Lists theses a great examples of database use.
Moodle Buzz
Modules and Plugins

Note Jan. 2007 from Daye Rogers of GSEIS about their use of it in Moodle 1.6.

We are currently using it for a rather large project at the School of Education. We have a group, the Writing Project, that wants to allows UCLA Writing Fellows currently teaching in the LAUSD (thats over 300 people) to enter student work for a yearly Writing Event. This is a great activity, since it allows for multiple uploads. Each teacher that decides to participate can upload 5 pieces of student work (you can set a maximum entries limit). You can also create templates that allow for formatting (even css formatting) the view list of the files uploaded.