It shows the cursor's distance from the origin (x=0, y=0), as well as horizontal and vertical displacement of an object from its starting point. It display a line's length as well as its angle of creation. The show location bar can be used to set a dimension when the object is being created or while it is being modified.
When you have selected certain tools, it is used to set such things as the number of sides of a regular polygon, percentage along an object, radius of a fillet or length of a chamfer, etc...