This accessory allows you to program your Arduino board through the ISP connector.
With this programmer you can upload sketches and burn the bootloader on any Arduino (or other brand) AVR based boards through the ISP connector. By uploading a sketch with an external programmer you can remove the bootloader and use the extra space for your sketch.
The Arduino ISP can also be used to burn the bootloader on your Arduino, so you can recover it if you accidentally corrupt the bootloader. Burning the bootloader is also necessary when you use a new ATmega microcontroller in your Arduino, and you need the bootloader in order to upload a sketch in the usual way.