I won't go into too much detail of what these cards are for, others have already covered that.
Basically these cards give you Microsoft Points (not to be confused with points that can be achieved through playing the games) which can be used as credits in XBOX Live Marketplace. There are various things available, themes for your console [which I'd never spend money on personally], games (many of which are 'retro' games given a facelift and in the future videos and even movies and TV episodes.
The games are what its all about so far, and some of them are very good indeed.
However onto the added benefit of using these 'scratch cards'. You don't need to use these, you can give Microsoft your bank details and buy points directly through your XBOX. It works. However reading through the small print Microsoft basically reserves the right to keep your card on file and (assuming you're already an XBOX Live GOLD subscriber) will use your bank details to keep you subscribed to GOLD; I don't like that - I consider it sharp business practice (though the small print in the T&Cs says they'll do this; the problem is you can't opt out).
(Note as of now when I write this review it is not possible to delete your card details either, so they really have you trapped into a service you might not want in the future).
So - if you want points to spend then buy these points cards, it's a lot lot safer. Plus of course you save £1 each time you buy.
I'd follow the same logic for the XBOX Live Gold membership cards and use those instead of sharing your bank details with Microsoft.
Hope this helps!