Sometimes incorrectly referred to as a 'Google Sitemap' since Google was the first to popularize this, it provides a direct route for search engines to find all the pages on a site without having to spider the site (following all links). On a large site in particular, it can help notify Google of new pages. It doesn't really help in rankings at all, it's purely a method of discovery, so smaller sites or sites where the content does not change regularly will get less benefit.