It keeps the engine temperature in target ranges. It opens when the engine is at the temperature and the water pump moves coolant through the thermostat housing and to the radiator. when it is below the temperature it closes, and it doesn't flow in the same path (usually it just flows back through the head.

Old cars had fans that always ran, often times off the crankshaft. If cold coolant ran through the radiator it wouldn't maintain proper temperature with the fan running! Same situation with highway driving. There's so much airflow to cool the engine - being able to block off coolant is very important. Newer cars with electric fans use this in combination with the thermostat to provide more efficient cooling (by not running fans all the time).

Cars with electric fans use a coolant temp sensor (sometimes on the radiator, or the block, or elsewhere) that kicks over a switch to turn fans on and off.

Then you have a temperature gauge which sends a signal to your dashboard/ecu. The computer uses this in combination with a bunch of other data pieces to make the engine run smoothly.

Anyway, that was all just random info