The idea is that, since you'll definitely need to carry your room key (KTTW--Key to the World) with you all the time anyway, you can avoid having to carry cash or credit cards by putting things on your KTTW card ... also known as "charging to the room," in real-world speak. Although some small kiosks only take cash, so you might want to have a little of that.
You can put charging privileges on some, all, or none of the room keys. Once you have charged a certain amount to your KTTW card (the amount varies by resort level--I think it's value $500, mod $1000, deluxe $1500, but it might be 500/750/1000 or something else), the resort will charge your credit card. Otherwise you can pay the balance on your KTTW card at checkout using any method you like (credit card, cash, Disney gift card...).