It does the same thing it does for audio: routes and multiplexes streams. Video devices in Linux the same problem as audio devices where multiple applications can't have them open at the same time. Pushing the video through a daemon also allows you to do the same interesting things that you can do with audio streams in pulseaudio/jack, where you can transparently change the inputs and outputs around without having to restart or reconfigure the application, and you can route video through arbitrary effect chains before it reaches the destination.

If the application can use v4l devices directly (I think this includes all ffmpeg players such as mpv) or can output a video stream somewhere, then it might make sense to also add a pipewire backend there. Maybe somebody will make this easy by adding a pipewire encoder/decoder to ffmpeg? Then the applications won't have to do much at all to support this. If the application uses gstreamer, you may already be able to get it to work automatically by using pipewiresink/pipewiresrc.