It releases pressure from the intake tract when the throttle plate is closed. Without it, the pressure will back up into the turbo, causing compressor surge - where the engine is trying to spin the turbo one way, and the pressure backing up in the intake tract is trying to spin the compressor side of the turbo the other way.
Makes for nasty wear, and can break the 'axle' that connects the turbo hotside with the compressor side. This can also be caused by using a BOV that is too small for the power you are pushing through it - like using the stock unit on a system with a larger turbo, hardpipes, and a replacement intercooler. With this setup, you would get compressor surge even if your stock unit was working perfectly, it just can't let enough pressure out at once.
A faulty BOV will usually refuse to hold boost - so it will be harder to get full boost. The tests above will tell you if yours is faulty or not.