Indeed, it's to stop the two separate pieces of the rack from twisting around the fork (keeping them parallel to the wheel) Notice that these style racks only attach to the outside of the fork. Most front racks that don't have this bar attach to the inside and outside of the fork at the eyelet, but some bikes only have a threaded eyelet on the outside, in which case these style racks (with the bar over top) are a better option.
Without a hoop over the wheel, the two sides can rotate around the fork legs into the path of the moving wheel.
see this page from this persons journal, scroll down to photo of front wheel and read how it happened to her rack that didnt have a loop. She had to get the wheel replaced as it destroyed a number of spokes.
I saw this about the same time I has posted stuff about putting a front rack on my mtn bike recently, and some people made good suggestions to avoid this happening, then saw this ladies incident. So it can happen.
Spec' Tarmac (road), Spec' Secteur Disc (commuter & tourer), Salsa Mamasita (MTB), CoMo Speedster (tandem), Surly Big Dummy (cargo), Airnimal (folder), a train pass, and NO car :)
Originally Posted by fietsbob
just make sure the light is waterproof, since it will get lots of wet wheel spray
I recently mounted a Supernova E3 light in a position similar to that and discovered that it is not fully waterproof. Even so, Supernova say that it should be able to handle such conditions and so are hopefully going to fix it under warranty.