Both the sender of the on-chain transaction and the recipient are able to generate and verify this script. The sender can now safely move BTC to this contract, knowing they will either receive satoshis off-chain, or, if it fails, be able to claim their BTC back. Depending on the exact arrangement, the sender might also ask for a non-refundable Lightning payment upfront, which can be used to cover the transaction fees from entering and exiting the smart contract, as well as compensate for the opportunity cost of funds being locked up for some time period.