It does a couple things:

Holds the camera (zing!)
Provides a central horizontal tripod mounting location (the old Canons had either way off to the right or left)
Provides a vertical tripod mounting location (like a modern L-bracket)
Has a built-in level (still present, clear and easily read on this example)
For folks with big hands, it makes the compact cameras a bit easier to hold and balance with bigger lenses. When I had an IVSB and my Canon LTM 50/1.2, it was more comfortable to hold with this mounted, even if it was heavier.