understanding some code

[Larz60+]

def count(string):
    # Create empty dictionary out
    out = {}

    # for each letter in the string
    for letter in string:
        #if the letter's not already in the dictionary
        if letter not in out:
            # add letter to dictionary and set value to 0
            out[letter] = 0
        # now increment the letter's value
        out[letter] = out[letter] + 1
    return out

string = 'cache'
As an example structure of the dictionary for above string would look like:

out = {
    'a': 1,
    'c': 2,
    'e': 1,
    'h': 1
}