Trying to understand how CROSS APPLY works

Asked to support a new application in SQL 2005, and came across some code which works fine - but was just wondering if anyone could give a detailed breakdown of how this code works.

Specific functionality is a function which will break down a long single-line description (of up to 4000 chars) into multiple smaller chunks of VARCHAR(40).

Here is the function :

CREATE FUNCTION [dbo].[SplitColumnLength]
(
      @ID INT,
      @Split VARCHAR(4000),
      @Length INT
)
RETURNS @Values TABLE
(
      [ID] INT,
      [RowID] INT,
      [Value] VARCHAR(500)
)
AS
BEGIN
      IF @Split IS NOT NULL
      BEGIN
            DECLARE @Index INT,
            @Loop INT

            SET @Index = 0
            SET @Loop = (SELECT CEILING(CONVERT(FLOAT, LEN(@Split)) / CONVERT(FLOAT, @Length)))

            WHILE @Index < @Loop
            BEGIN
                  INSERT INTO @Values VALUES(@ID, @Index + 1, SUBSTRING(@Split, (@Index * @Length) + 1, @Length))
                  SET @Index = @Index + 1
            END
      END
      RETURN
END

and the application code joins to this function in SQL Server 2005 using CROSS APPLY - e.g. to split customer description into VARCHAR(40) chunks, it uses the following :
      -- SELECT s.RowID, s.Value
      -- FROM CustomerDetails b
      -- CROSS APPLY dbo.SplitColumnLength(b.CustomerNo, b.CustomerDescription, 40) s

As I say, the code works fine - but to understand it, I was hoping someone could give a breakdwon of how the function itself works, and then how the associated CROSS APPLY use of that function (as per the above example) also works.

Thanks.