Consider it as a lubrication for tubes. The tube installs easier because of the reduced friction from the tube sliding inside the tire. It minimizes folds and pinches as the tube is inflated and subsequent flats later. I find I can usually install a tire/tube easier, faster, and without tools when using talc. The final part of the tube install by rolling the last section of tire bead over the edge of the rim is not possible by my 67 year old hands without the aid of "tube lube" :-)
I have worked as a wrench at three bike shops and it was standard practice to use "tube lube". Back in the day as a diver in the Navy we used cornstarch before sliding in our wetsuits, just like installing a tube, make sure everything is dry and apply the powder.
I was reading my previous post and thought it sounded a little sarcastic Tom, didn't mean it to be...........
I just finished building two new wheels and am anxious to complete and try out my latest bike build up. (If it quits raining) (I thought June was the start of summer :-)