OK engineereese!
Basically the function of a condenser in a coil ignition circuit is to reduce the spark at the contact points as they open in the distributor and thus minimise burning and pitting of the points. Arcing is caused by the effect of self induction in the coil as the points interrupt the flow of current. The resultant collapse of the magnetic field produces a high voltage to be generated in the primary winding which then tends to flow across the points, thus causing burning or pitting. This current flows into the condenser and charges it as the points open the rapid collapse of the magnetic field produces this high voltage in the primary windings, which can be as high as 250 volts. This further charges the condenser and the consequent collapse of the field causes a high voltage to be induced in every turn of both primary and secondary windings. As the secondary winding has about 100 times the number of turns of the primary, the voltage can reach as high as 25000 volts. Normally this voltage is not reached as it is limited by various factors such as point gap, compression, engine revs. Etc. so only sufficient voltage is produced to produce a spark at the plug. As the spark is produced at the plug gap the energy in the coil, stored in the form of magnetic flux, begins to drain from the coil through the secondary circuit thus sustaining the spark for a fraction of a second or several degrees of crankshaft revolution. During this interval the condenser discharges back through the primary winding producing an oscillation of the current flow in the primary circuit for the brief interval that is required for the primary circuit to return to a state of equilibrium. The condenser DOES NOT DISCHARGE UNTIL AFTER the spark has occurred at the spark plug.
Burning of points results from high voltage, presence of oil or other material at the points, defective condenser or too small a gap in the points. High voltage can be caused from high voltage setting of the regulator or high resistance in the charging circuit or the third brush set too high. On third brush generators too small a gap at the points allows the points to stay closed longer resulting in the average current being high enough to allow the points to burn rapidly.
For the rest of us
Prevents arcing/pitting of the points.