The Editor

There are others, but this is most used: Poedit, a cross-platform gettext catalogs (.po files) editor.

The Formats

.mo stands for Machine Object
-- compiled export of the .po file which is used by WordPress

.po stands for Portable Object
-- editable text file with the translations strings
-- based on the master .pot file, using Update from POT file PoEdit function
-- some folks distribute this as a master file, but it should be used only for translations

.pot stands for Portable Object Template
-- editable text file used to grab all the translatable strings from WordPress itself and Themes and Plugins, using Update from Sources PoEdit function


The Procedure

Duplicate the .pot file and rename it to plugin-basename-lang_COUNTRY.po
Example for the referenced plugin case: subscribe-reloaded-pt_BR.po
-- pt_BR means Portuguese Brazil, but many languages don't have a country variation...
-- you'll have to fill in with your own language
WPLANG in wp-config.php file must be set to your language, e.g., pt_BR
Every time you save the .po file, PoEdit automatically generates a .mo file, which is the one WordPress uses and basically the only one you need to upload


Observations

If you do a full or a decent partial translation, kindly send it to admin@affordableplugis.com  author so we can include it in the Repository and you get credited for it.
Don't forget to make a backup of your translation, because if you upgrade the plugin your file will be lost.