I am trying to install the MLM on my shared server.
I did the following steps.
1.- Open the mlm/mlm_settings.php file with a text editor.
2.- Edit the script settings and save.
3.- Upload the MLM folder to your FTP server.
4.- Use your FTP software to CHMOD the MLM folder to 777.
5.- If you have selected to use mySQL run the script with the 'Init' command:
http://<script_path_here>/mlm.php?cmd=init&pwd=password

I also created a MySQL database with a user with all access, before I did that. It doesn't say to do that, so maybe I shouldn't have.

I run the script and I get an internal server error.

Here are some things I'm confused about.
What password are they talking about at the end of the http script URL?
What is the admin and password referring to at the top of the mlm_settings file?
Should I create the database first?

No needs to create the database nor the table. Step 5 "If you have selected to use mySQL run the script with the 'Init' command:
http://<script_path_here>/mlm.php?cmd=init&pwd=password" actually is for creating that database and the table.

It is the password you have defined in the mlm_settings.php file. From that file:
$admin_password = "admin"; // Your administrator password

The password to access your data as explained above, both from a browser and MaxBulk Mailer.

No needs.

Maybe I don't understand what they mean by
// mySQL User Name (For Full access!!)
// mySQL User Password (For Full access!!)

Are they talking about a user that I created on phpAdmin for another database?

Maybe this is a problem.

I got it to work by creating the database first. I also had to change the chmod to 775 because it's the highest my server will let me.

I had to do this again for another hostgator site and I want to make it clear that I had to change the permissions for all the files to 755 on the server control panel.

Good to know. About creating the database first it makes me think your access data doesn't allow database creation.