This has no side effects in terms of output, and the text file read in is simply treated as though it were part of the outer file. It is normally used for reading in sections of a chapter, diagrams, complex examples etc.
An example of a chapter file might be:
% Chapter 2 of dissertation, stored in chapter2.tex
\chapter{Software tools}
\label{tools}
The chapter heading is labelled to allow symbolic cross references to the chapter from later sections of the document. In this example, the third section of this chapter has yet to be prepared, and so has been commented out (or has been dropped from the plan!).