Basicaly it's saying to the student: "Do what I do"
So you teach usually small pieces (upto 8 bars perhaps) by repeating a bar at a time and the student repeats what you play, till memorised.
Used with discretion it can help develop short memory, a sence of rhythm, dynamics shaping a musical phrace etc. using the ear.
Use it parallel to teaching note-reading so both skills develop simultaneously at the early (beginning) stage.
At least this is how I always understood it.