Mark, think of it as tactical reserves. A unit gets used one of two ways:
1) On the defense, units in RESERVE (and not in ZoC, and having sufficient MP, and passing some checks) can march to join the battle. They mostly don’t get the fortification bonus, but they do fight. You can imagine that a soviet attack aimed at some Romanian division might have a very different outcome than intended if 7th Pz shows up. Of course, doing so will drain out readiness and MP from 7th panzer in the German turn.
2) When attacking, units in RESERVE may be committed by your leaders (assuming not in ZoC, sufficient MP, and passing some checks) to reinforce the attack. Sometimes this lets you bring extra power to bear at a point you couldn’t get it, sometimes it helps hedge against a player who called the odds a little too fine. And sometimes it just gets the reserve killed as well. You can imagine that if three soviet rifle divisions commit on top of the big attack going in, they may well break a position that would have otherwise held. Of course, those divisions will lose readiness and MP.