its also handy when using floats.
caldwell is right ANY absolute positioned elements look for an immediate parent with a position value other than static. using his example, if the header was width of 960 and centred, the absolute positioned element would sit flush top/left of the header when it has position:relative. however if it didnt the absolute positioned element would then search for the next available descendant, if no positioning values are found, it will head straight to sitting flush top/left of the BODY.
its a good stabiliser and doesnt do fancy things like absolute or fixed position can do, it keeps the element within the document flow. It is worth having a good understanding of ALL the position values and how they work and interact. position:relative is actually my favourite.