hi guys

trying to understand what this line means

sed is a stream editor and i understand that, i have a file already selected
i want to edit so i use -e

sed -e

the next stesp is s/$*

s is a subsititute replacement

sed -e s/$*/[WORDS DELETED]/g

$ is in reference of the last line
/g makes it global so it would search everything

what does */[WORDS DELETED] do?

.....

This is an extremely confusing and subtle question. It is very easy to get this wrong.

First the dollar sign works differently in sed depending on where it appears.

sed '$d' < /etc/passwd
will print the contents of /etc/passwd, all except the last line. That is an example of $ being used as a line number.

On the other hand:
echo box | sed 's/.*x$/something/'
echo boxes | sed 's/.*x$/something/'
shows the dollar sign anchoring an expression.

But to act as an anchor, the dollar sign must appear as the last character in the expression. Otherwise it becomes a regular character:
echo '$$$$$$$$' | sed 's/$*/something/'

Now in all of these examples, the sed command was enclosed in single quotes. That is not the case in the question. Thus the shell will see $* and probably replace it. Exactly what will happen depends on the shell and the context. I am using ksh:
set one
echo $*
echo one | sed s/$*/something/

The final command will print "something".