Absorbs the fine atomized oil spray emitted through vent hole in the oil hub cap. Hub has to be vented or it would push oil past seal as it warmed up. We always ran a rag in the shiny hub cap to stop oil streaks on wheel. Just enough oil to catch dust and streak wheel. Right side is usually the worst because slope of road puts oil level closer to vent hole. Oil spray ( think minuscule) can lubricant the clips that hold on hub cap. Hub cap will move a little on wheel, pot holes and such, add a lubricant and eventually off it comes.
Oil loss is minimal. Usually never have to add any. Might lose a tablespoon in 100,000 miles ,unless it?s overfilled, then there will be more loss.