Qi (pronounced "chee") Gong is a Chinese method of self cultivation based on very old Daoist and Chinese folk principles. Qi is a very broad term, and often gets translated into English as 'energy', however I much prefer the term 'atmosphere'. Just as with the word atmosphere, Qi refers to not only the physical happenings in the system, but also the energetic and the 'feeling' of things that are happening. Just like a room can have a particular atmosphere (which can refer to both things like humidity and temperature, but also the general feeling of the room), so does a person have a particular atmosphere, which can and does affect the atmospheres of others and the environment. Everyone knows about the 'buzz kill' person who is depressed or angry and comes into a room full of happy people and completely changes the atmosphere! The good news is, with appropriate practice, we can completely change our own atmospherics and slowly become the person that is always lifting those around us, not unlike the enlightened sages in the stories.
The purpose of this particular exercise is to focus and change the atmosphere of the spine and spinal cord. The physical benefits are probably obvious - more strength, flexibility, and deeper relaxation of the tissues surrounding the spine, but with a proper effort we will also begin to notice the other elements of the atmosphere of the spine change. New awareness, sensations and feelings of energy, heat, and buzzing will begin to appear in the spine and later begin to move around and change, all the while enhancing your experience of the spine.
The experience of these feelings make this exercise very therapeutic and also quite effective at resolving many back issues. Like most exercises in the Chinese system, daily practice is a must if you want to delve into the more interesting atmospheric elements, I recommend doing this as a wind down - the final thing you do to settle after your daily practice.