It has been said that its purpose is to kill gods, but how can it kill gods, or a god? I watched the episode, but I just don't understand it.
It seems like you missed (or did not get it yet, I am not sure when this is explained) what gods stand for.
The Gods is the term referring to the "collective human unconsciousness", C's World, which is the source of the individual identities for all humans, living and dead throughout the Code Geass Universe.
How it works never really was explained as far as I know. Nobody knows how it was build either. but was 'accidentally' found by the British empire, and is exclusively owned by the emperor Charles.
So all with all it is.
It is a weapon to destroy CHU, C's world, and with that destroying the geass and its powers all together, and all humans unconsciousness