It allows the coping/decking to move independently from the pool walls. Without it, the waterline tiles could crack/break from any slight settling/movement of the decking. Sometimes a small gap filled with silicone or another flexible sealant is used rather than the plastic.
My waterline tiles were installed prior to my cantilevered decking being poured, and they back buttered the tiles rather than applying the thinset to the pool walls. This created scallop shaped gaps between the tile and wall at the very top. When they poured the decking afterward, the concrete seeped into these gaps, which were just behind the plastic strip. Many years later the decking settled slightly on one side, and heaved slightly on the other from some tree roots, and some of the tiles broke because they were in direct contact with the decking. I'm in the process of grinding the protruding scalloped shaped pieces of decking off so that my new waterline tiles don't experience the same fate.