What is the purpose of the channel in my seat?
The purpose of the channel in a bike saddle is to reduce pressure to the perineum, which can cause numbness and other long-term problems. This is a matter of both comfort and health, although not everyone is affected. Individual body type, saddle design, bike fit, and riding style work together to make saddle fit a very personal issue.

On a related note, some of the worries about erectile disfunction seem to be overstated, though this is still an open area of research. See: 
Saddle Seats and Erectile Dysfunction - The myth Exploded.