The shim is to accommodate the seat post diameter to the rack clamp diameter IF NEEDED. If the post is too small (as discovered when the clamp bolts are fully tight and the rack clamp is still loose on the post) then you open the clamp and place the shim inside it, around the post. If the shim is the correct thickness (and it might not be) it will fill out the clamp and with the bolts retightened the rack will now be snug.

BTW these racks are rather minimal in load capacity and tend to get pushed out of line easily. Almost every one I see needs aligning and more tightening, whether it is as tightened as it's design allows for. Having a shim between the clamp and the post just adds a squishy and slip prone layer, but it's the best they offer without a specific rack for each post size. Andy.