For future reference, typing
will bring up a manual page describing the ins-and-outs of almost any program installed on your system.
The "-d" option sets the delimiter - the place at which to separate the elements in the file (/etc/passwd) by - in this case, it is the colon ":" character.
The output is then passed to the "grep" command where it is searching for the pattern dictated by "^J" - I don't know what this pattern dictates. That's for you to find out.
And the "wc -l" command means to count the number of lines that the "grep" command prints.