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That's the old way of regulating the fire's Burn Rate, based on the size of the fire you wanted. By limiting the exhaust capacity you limit the air-intake capacity. It works very well and lets you stack a good amount of wood to slowly burn down through the entire night.
It takes time to master with your given wood species, but yields a good balance of heat generation and overall burn time. However, it does create more creosote build-up and requires more frequent chimney cleaning. Clean annually until your chimney sweep can gauge actual necessity.