This is treated as a whimsical absurdity, but it has a practical purpose that’s hardly obviated by the antiquity of the law.
I’m a sailor myself - I’d certainly want a warning that a bridge is lower than its charted height. The signal is clearly listed in the relevant Port of London notice to mariners [0]. Moreover, the signal also shows the height of the restriction (and in a neat, safe way - nudge the straw and you’ll know you’re too tall):
“Where the headroom is reduced this will be signalled in accordance with the Port of London Authority Thames Byelaw 36.1 namely:
“By Day – A bundle of straw large enough to be easily visible and displayed at the height of restricted headroom”