The spiral punch is used to punch the holes for spiral binding, such as shown here:
That way it is possible to create spiral bound albums completely from scratch or add pages to purchased albums. Not a necessity, but definitely a fun tool to have.
I have seen pages and cards where the punch was used to create decorative elements, but I haven't played around with that myself yet, so I cannot really say much about that.
Hope this helps.
Have a good one.