You can only use this template on PvP characters.
This template saves only armor and weapons, not the skills and attribute points. For saving skillbars and attribute point allocation, see the skill template.
This option is very effective only if you want to change from one build to another and you need different armor or weapons. You can press "Load Template" and choose which set you need.
How to use the equipment template option Edit
Another good use for the template is that you can share it with others.
You can send your template by entering the templates folder inside the guildwars main folder, then enter the equipment folder and give the text file with the template name to friends.
To add someone's build you need to put his text file into the equipment template folder and you will have the template.
You might find it easier to organize your templates if you give them descriptive names like "EA fireburster, Mo WoH" etc.