It formats the string as two uppercase hexadecimal characters.
In more depth, the argument "X2" is a "format string" that tells the ToString() method how it should format the string. In this case, "X2" indicates the string should be formatted in Hexadecimal.
byte.ToString() without any arguments returns the number in its natural decimal representation, with no padding.
Microsoft documents the standard numeric format strings which generally work with all primitive numeric types' ToString() methods. This same pattern is used for other types as well: for example, standard date/time format strings can be used with DateTime.ToString().
