The purpose is to catalog your media and classify it so that you can find it very quickly. This is especially helpful if you have stock footage or motion backgrounds and other images that you use regularly in your work. They can be anywhere on your hard drive or even on multiple hard drives and you can catalog them all in the media manager and search for them by criteria that you choose or recall them in just a few clicks using "tags".
I explain it in this preview clip Just what IS the Media Manager? from the VASST Training DVD Vol. 7 Media Manager Demystified. There is another preview video on that page which will show you how to handle off-line media. (sorry for the shameless plug but it does answer the question)