Python program that obfuscates an email address
The code is straightforward and reads well, but:


string concatenation is not very efficient, especially in a loop. You'd be better off using str.join on an iterable;
encoding the mailto: part yourself impairs readability and maintenance, if only you had a function to do it for you. Oh wait...
The comment at the beginning would be better as a module docstrings, you would then be able to use it as the argparse description using __doc__;
You should avoid interleaving code and function definition, and protect top level code using an if __name__ == '__main__': guard.


Proposed improvements:

#!/usr/bin/python

"""Convert a string into its HTML entities"""


import argparse


def command_line_parser():
    parser = argparse.ArgumentParser(description=__doc__)
    parser.add_argument('string_to_mung', help='String to convert')
    parser.add_argument('-l', '--link', action='store_true',
                        help='Embed the munged string into a mailto: link')
    return parser


def mung(plain):
    return ''.join('&amp;#{};'.format(ord(c)) for c in plain)


if __name__ == '__main__':
    args = command_line_parser().parse_args()
    string_munged = mung(args.string_to_mung)
    if (args.link):
        string_munged = '&lt;a href="{0}{1}"&gt;{1}&lt;/a&gt;'.format(mung('mailto:'), string_munged)
    print(string_munged)