To crunch text, just type it into the upper window and it should appear in the lower window. If your machine refuses to do so automatically, you can click on Update to force it to crunch the text. Uncrunching text is similar, just click on the uncrunch box and type tokens into the lower window. The Binary button converts text into a compressed form. Do note that the vertical bars wouldn't appear normally, but are just there to improve legibility.
Detailed comments are also available.
For the source, click here. Compression LZW compression, decompression, implementation issues, and algorithms by Prof. Gary Perlman, of Ohio State University. The text of the LZW patent held by Welch. A discussion of the redundancy of the Lempel-Ziv algorithm by Tjalling Tjalkens. An exercise involving the Lempel-Ziv compression and decompression methods, including explanations, by Aaron D. Wyner, from the IEEE Information Theory Society.