Purposes:

1. Useful when not wanting to be actively playing, but still watch what's going on.
2. This could kick in automatically when a player is idling for a certain amount of time.
3. It could be built in such a manner that, if used, could drastically reduce lag (i.e. you don't need to broadcast a spectator's character attributes to everyone else in the level, and UDP could be resurrected specifically to broadcast non-spectator characters to spectators).

Of course this isn't going to go anywhere because Stefan's gone and who knows who's working on the client now.