It's an alternative for storing needles so you don't lose a needle in a tomato (Which I have totally not done and then been stabbed on the other side of the tomato... Nope nope nope!)
It's most often used in travel kits, No big need to store your needles when you're going to be sitting in one spot reaching to the same place you put your pins you know? I do EPP (English paper piecing) and I like to carry it with me so that I can work on it in the car or while waiting in line or things like that. It's all fiddly, teeny hand sewing, so it works out really well. I can keep them still and even wrap tails around them like you see I've done with a couple. But it's not as quickly accessible as a pincushion.