As the name implies, it is used to clip or hide anything that overflows the boundary of the container to which it is applied.
It has other uses.
It is very commonly used to clear floats.
It can be used to contain margins thereby preventing the phenomenon known as margin collapse.
Please read my post #6 here:
Margin Collapse - #6 by ronpat
copy the code to a file and run it on your PC. Walk through the steps that I described in the message using the code file that I included. It demonstrates 3 methods of preventing margin collapse.
You can also read this reference for a more technical explanation of margin collapse.
http://reference.sitepoint.com/css/collapsingmargins