The blog article is mostly right, but not complete. To have a full understanding of what an odex file does, you have to understand a little about how application files (APK) work.
Applications are basically glorified ZIP archives. The java code is stored in a file called classes.dex and this file is parsed by the Dalvik JVM and a cache of the processed classes.dex file is stored in the phone's Dalvik cache.
An odex is basically a pre-processed version of an application's classes.dex that is execution-ready for Dalvik. When an application is odexed, the classes.dex is removed from the APK archive and it does not write anything to the Dalvik cache. An application that is not odexed ends up with 2 copies of the classes.dex file--the packaged one in the APK, and the processed one in the Dalvik cache. It also takes a little longer to launch the first time since Dalvik has to extract and process the classes.dex file.
If you are building a custom ROM, it's a really good idea to odex both your framework JAR files and the stock apps in order to maximize the internal storage space for user-installed apps. If you want to theme, then simply deodex -> apply your theme -> reodex -> release.
To actually deodex, use small and baksmali:
https://github.com/JesusFreke/smali/wiki/DeodexInstructions
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