For the most part, a privacy policy template is just what it sounds like. It's a template that was already made by somebody else and that you can use for your own website if you wanted to. This is incredibly helpful because creating a privacy policy from scratch can be a troublesome affair if you have no legal training. You would have to commission the help of a lawyer in order to do it right.
If your website is aiming for legitimacy, you definitely don't want to take this issue lightly. You can easily get in trouble with your customers and with the law if you don't have a privacy policy or if you have a bad one.