Sellers can protect valuable items with a secret reserve price. Bidders see "Reserve met" or "Reserve not met" - never the amount - and the item only sells when the reserve is reached.
High-value sellers will only list on your site if they are protected against a low final price. The reserve price gives them exactly that protection, which brings the cars, watches and art that make a marketplace attractive.
The bidding engine handles the reserve automatically: when a bidder's maximum is above the reserve, the price jumps straight to the reserve, so the auction never ends just below it by accident.
No-reserve auctions, on the other hand, create excitement and urgency. The badge tells bidders that the item will sell, whatever the price - which usually brings more bidders and a better result.