The hardware box has the key that signs the Hash so if someone stole the password database , it will be hard for them to crack as the key is stored elsewhere.
This is not fool proof but an additional layer and the best part is it is cost effective. I am not sure about the performance and scalability nevertheless, a good one.
The links below has more information:
http://arstechnica.com/security/2014/03/can-this-70-dongle-stem-the-epidemic-of-password-breaches/
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