What this answers
This test answers "do these groups differ in where their values sit relative to the overall median?" using the least amount of information possible from each observation: not its rank, not its value, only whether it is above or at-or-below one shared threshold.
How it is calculated
First, the median across every group combined (the grand median) is computed. Then, for each group, this calculator counts how many values fall strictly above that grand median and how many fall at or below it, building a 2-row table with one column per group. A standard Pearson chi-square test, the same construction used for the Chi-Square Test of Independence, is then applied to that table.
Worked example
For three groups of 1, 2, 3, then 10, 11, 12, then 20, 21, 22, the grand median falls somewhere in the middle group's range, so the first group lands entirely at-or-below it, the third group lands entirely above it, and the middle group splits. The resulting chi-square statistic is large relative to 2 degrees of freedom, correctly detecting the obvious separation between groups even using only this coarse above/below information.
Assumption audit
What this result does not mean
A significant result means the groups' values are not evenly split above and below the grand median, not that the groups differ by a large amount; this test discards all information about how far above or below the median each value falls, which is exactly why it has less statistical power than a rank-based alternative on the same data.
Limitations
Because this test throws away so much information (only above/below matters, not magnitude or even relative rank), it typically has lower power than the Kruskal-Wallis Test to detect a real difference; use Mood's median test when you specifically want a test that depends only on medians and is minimally sensitive to shape or outliers elsewhere in each distribution.