Well, yup. That's pretty much it. It gives you a high contrast spot to allign with mirror spot, which is easy to do, even in the dark making it easier to use than a site tube. Combined with the Rich Combs special primary mirror spot -- a self adhesive five pointed star -- it is very easy to exactly center the round spot over the five pointed star, it makes the whole process pretty accurate, assuming your primary mirror is spotted dead center of course. But the cheshire doesn't tell you if your focuser axis is parallel to the optical axis, unless of course you test it racked all the way in and all the way out and look for differences.
Actually a site tube with crosshairs at the other end (such as the tectron site tube) allows you to directly examine where the focuser axis points. So one could say that for focuser tilt, the site tube is the better test device. If you collimate the primary in your normal way, and then put in the site tube, if your focuser is aimed ok then the crosshairs should go right through the image of the primary spot.
My experience with using a site tube in this manner has lead me to be very careful, as it seems easy to misread the position of the cross hairs due to my eye changing position sightly in the eyehole of the site tube. The longer the site tube, the less this is a problem. Humm... there's an idea! I guess I should make a site tube about a foot long.
Chuck