It's mostly supposed to protect from having your client hijacked. The number of 'I was hacked' posts went down dramatically when the instituted Gameguard.
I still am not a fan, mind you, but at first there was some confusion about it's purpose and many people thought it was supposed to get rid of bots. It doesn't and never has, but it does help keep someone from hijacking your game.
You can't terminate L2 when it has hung itself up either, unless you manage to stress the system enough to hang up gameguard too - it uses an exploit in the OS to give itself some rights to deny you rights about the L2 process.
It's possible to fix the loopholes it uses though, I think, but then, that might already be bannable - who knows.