It CAN add a few ponies. It also saves bodywork that may be a bit close to the exhaust.
As exhaust cools, it gets denser, and slows down on its way out of the pipe. By wrapping it you keep it hot and theoretically thus keep it moving so the motor doesnt have to work as hard to push it out. Makes the motor more efficient, the faster you can get air in, and out of a motor the better. It also should keep the engine area and oil pan a bit cooler by not radiating heat to them.
Main thing is protecting bodywork IMO though