Combining them literally gives you: “Encounter (逢) the ominous (凶), transform (化) it into the auspicious (吉).” The logic of the idiom is perfectly contained within its four characters, making it a powerful and elegant expression.
逢凶化吉 is more than just a phrase; it's a reflection of a deep-seated worldview in Chinese culture, influenced by Taoist and Buddhist philosophies. It embodies the belief that fortune is not static and that adversity and prosperity are two sides of the same coin (like yin and yang). A terrible situation (凶) may contain the very seed of a great opportunity (吉). This concept promotes resilience and a proactive, optimistic mindset. It suggests that with wisdom, courage, or perhaps the favor of heaven (see 吉人天相), one can navigate life's perils and emerge stronger.
This idiom is widely used and understood, though its four-character structure gives it a slightly formal and literary feel. It's not typically used for trivial matters.