Functions - two types 
1)Buitin - Prepared by QTP
2)User Defined - Prepared by programmer/tester

Syntan to creat User defined function in QTP

Function FunctionName(Parameter1, Param2,.....)
 Statement1
 Statement2
 .....
 .....
End Function

Example:

Function Bigger(value1, value2)
 If value1 > value2 Then
  Bigger = value1
 Else
  Bigger = value2
 End If
End Function

Calling the function in the script

Result = Bigger(20,21)
Msgbox Result  'gives 21

User defined function is a peice of code/program which 
intended to perform some specific task.
e.g if i want to create 100 user id's and i can use each id 
to create a profile. To avaoid duplication of ID's we can 
write a function (.vbs extension) which generate ID's based 
on system date and time so all the ID's will unique. After 
that we need to add that function into resources tab in QTP 
and can call that function using a single line statement 
as ...call <functionname>(arguments, if any)