Well my understanding is it does this:
Gives correct spacing for flywheel from the engine block. Also keeps the flywheel from contacing block surfaces when it warps.
Also gives correct spacing of starters. Doesn't matter if it's mounted towards the engine or the trans.
Like almost every spacer you would use on something, gives some sort of mounting strength to mounting points for all parts involved. Remember this is a steel plate. compared to soft aluminum.
Last, This may apply to autos more then manual, keeps dirt not water out of the bellhousing. Because of the friction being apply the water will quickly dry up (think about your brakes). However, if dirt gets in there (can even be small as sand) it's going to cause some damage to everything from TBs to your flywheel. Sometimes it will even work it's way into your rear main seal.
Just my .02