An Obfuscator is the business of shrouding the facts. It is not encryption, but in the context of .NET code, it might be better. Although encryption can make your assembly completely unreadable, this methodology suffered from a classic encryption flaw, it needed to keep the decryption-key with the encrypted data. So, an automated utility could be created to decrypt the code and put it out to disk. Once that happens the fully unencrypted, unobfuscated code is in clear view.
As another comparison, we could compare encryption to locking a ten item meal into a lockbox. Only the intended diner (i.e. the CLR) has the key and we don't want anyone else to know what he or she is going to eat. Unfortunately, if someone can pick the lock (or find the key hidden on the bottom of the box), the food is in plain view. Obfuscation works more like putting the six-item meal into a blender and sending it to the diner in a baggie. Sure everyone can see the food in transit, but besides a lucky pea pod or some chicken-colored goop, they don't know what the original meal consists of. The diner still gets the intended delivery and the meal still provides the same nutritional value as it did before (luckily, CLRs aren't picky about taste). The trick of an obfuscator is to confuse observers, while still giving the CLR the same delivery.
Without argument, obfuscation (or even encryption) is not 100 percent protection. Even compiled C++ is disassembleable. If a hacker is perseverant enough, they can find the meaning of your code. The goal of obfuscation is to make the reverse engineering process extremely time consuming and painful so that it not worth the effort. The goal is to stop all casual hackers and as many serious hackers as possible.
Obfuscation removes context from compiled code that humans (and reverse-engineering tools) would use to decipher the code's meaning. The trick is to remove this context from evil intentions while retaining complete execution integrity with the original program.
Want to try obfuscation...
Fire up Visual Studio, click on the tools menu and select Dotfuscator Community Edition.
Dotfuscator is available in three editions and you can learn more about the differences here.