Grated tomato (tomate rallado) is used in many different Spanish dishes. In Andalusia it is smeared on toast and drizzled with fruity olive oil for breakfast. In Valencia grated tomato is a main ingredient in sofrito, which is used to make, among other things, paella. You can use grated tomato in pisto, an old fashioned gazpacho (the texture is quite different than when made in the blender), or as a base for tuna in tomato sauce (bonito y tomate). In fact you can substitute fresh grated tomatoes just about anywhere you would use canned tomatoes. It's a great alternative for people on low-salt diets, since tinned tomatoes usually have a lot of sodium.
If you've never grated a tomato before, you'll probably be surprised by how easy and quick it is. Just rub the tomato against a grater over a bowl.
The flesh, juice and seeds go into the bowl, but most of the peel stays in your hand. When you've finished grating, discard the peel or use it for making stock.
Grated tomato is not quite as refined as tomatoes run through a food mill, but it is quite different too from tomatoes finely chopped.
I will be honest: for a long time whenever a recipe called for "tomate rallado" I just chopped the tomatoes instead. When on a whim I tried grating tomatoes, I realized it really does make a difference in flavor and texture, and just makes Spanish dishes more Spanish. And it really isn't any more difficult or time consuming than chopping.