Why does steam distillation work?
I think that the main purpose (/ historical advantage) of steam distillation was to avoid the exposure of sensitive compounds to sustained heat by either lowering the required distillation temperature, or the distillation duration (at equal temperature), or both, by using steam as a carrier.

The solution that contains the compound to be distillated doesn't necessarily initially contain water itself, though even if it does, there is a significant advantage in that the duration of exposure to high temperatures is as short as the transport time until it is condensed (since the water is boiled separately, and not together with the compound). In traditional distillation the compound has to be exposed to heat for the time necessary to reach the solvant's  evaporation point AND the transport time, which is significantly longer than the transport time alone.