Here's a decent video on how transfer tape works:
It's actually the entire decal process, so just fast forward to the middle or so for the tape part. He's using clear tape but you can use the standard white transfer paper with the same results.
It's basically used to hold all of the little pieces of the decal together so that when the backing paper comes off, the entire decal can be stuck to a surface all at one time. If you have a decal that's all one piece, and can be peeled from the backing paper as one piece (like a rectangle sticker, for example), you don't need the transfer tape.
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