Under UNIX based operating systems (OS X, Linux etc.) permissions define who can do what with a file. For example if you can open it, write to it, delete it and so on.
With regards to OS X, when a program is installed using the package install application (for example, Office 2008, iWork, iLife, Flash, all system updates and system stuff) then it installs the files with correct permissions. Sometimes these permissions can get changed from what they should be, so you can verify and repair them
Won't affect disk performance as far as I know. If you are the admin, you can restrict the access to certain files for other users by changing the permissions.
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