For a teacher it means that a document is given to another student or teacher to allow them to review and evaluate the document without knowing the name of the original author.
First and foremost it helps the teacher to 'farm-out' the much needed feedback to students who are constantly seeking feedback of some kind.
For stronger students, it gives them an opportunity to flex their analytical skills against their peers. It also gives them practice in reading for incongruities in logic, grammar and spelling.