Here’s the speed-version of the explanation. ?? This applies – for the most part – to apache web servers, with mod_rewrite enabled in order to use pretty permalinks.
The .htaccess file (it’s actually an extension, but appears as a file) is located in the same folder your wordpress files are in. It is hidden by default, and you will have to check “show hidden files” in your file manager or ftp client to see it. If it exists, set permissions to 0666 in order to allow wordpress to automatically update your permalinks for you. If it doesn’t exist, you can create one yourself. After updating, make sure you set permissions back to 0644. Here is some good reading material with some other information that may be more helpful.
Settings Permalinks SubPanel
Using Permalinks
[edit] …almost forgot – That theme you are using may be just a tad on the questionable side when it comes to how some of the content is encoded in the theme files. I found it and downloaded it to take a look inside. My copy had external links to a banner and base64 in at least the footer. Yours probably does too. What esmi mentions about free themes that have gone through review is good advice; as well as what thanatica2 suggests for obtaining themes from reputable developers. Most of them are surprisingly inexpensive. Just food for thought.