It's primary function is to simulate daylight lighting, both for entire scenes and to facilitate composition of rendered elements into real life scenes.
I'll illustrate a painfully simple version below.
First we need a sky sphere.
|this is a painfully simple map...it puts a white 'sun' when mapped to a sphere in UV fashion. We use this as the color and glow map. Used in the Stencil channel, this could make the rest of the light source invisible.|
|Rendering with radiosity yields the following...which is illuminated only by the glowing part of the sohere|
|Using the same principle with a sky image will accomplish the same thing.|