Good question.
Well Crystal the idea is that the pot resistance loads down the 1Mohm input a touch. This will tighten everything up slightly, whilst still being in in the upper ranges of pick-up fidelity. It appears to ‘damp’ the raw pick-up sound, but still leaves a clear and accurate signal to present to the amp. I can hear an undamped pick-up instantly.
Try it.
Set your best amp-distortion lead setting with the guitar on 7 or 8. With me it’s 7 for single-coils, and I hit 8 for more definition.
Humbuckers simply need the tone on 7 or less, by their nature, depending on what value Vol-pot you use, and amp input impedance. General rule of thumb is 7, for lead.
Back in my Fuzz Face days, we’d dial distortion to full, and play at home with guitar on 10.
But once onstage, with that Superbass 100 turned right up - I was now getting enough distortion with the guitar on 8, and it was so much clearer.
Same rule applies to drive-pedal users. I don’t believe in stacking gain pedals. But with guitar on 7, a Fulltone OCD, and an amp over the edge of breakup - you should be able to wail convincingly.
It’s certainly the mature way to approach sound - from the source.