I'd say all it does is really refine how much you know a certain song. You have to know where to move a lot of the time, especially in harder songs. Flashlight cuts off more vision with sliders, so long or fast sliders might make you forget what / where the next hit is. The best way for flashlight to be used, if anything, is just to see how well you know a certain song. If you honestly think you can do it in your sleep (ie. you played it too much) then yeah, I'd suggest doing flashlight for kicks.
tl;dr - It's for self gratification. Flashlight racks up score, but it's painfully hard to boost your score if you don't know the song as if it were your name.
