What is the purpose of the middle-man actor in chaffing and winnowing? Chaffing and winnowing is presented as a form of confidentiality without using encryption. This is beneficial for countries where encryption is regulated. 

Below is a diagram from Wikipedia showing Alice sending "1001" to Bob.



My question is what is the purpose of Charles in this picture? Why can't Alice just chaff the data herself before sending it directly to Bob?

Additionally, if this assumes that traditional encryption methods aren't available, how are Alice and Charles talking over a secure channel?
Ron Rivest proposed this technique as a way of dealing with export restrictions as well as giving some protection to the parties communicating. It was roughly at the time of the Clipper chip debate. It is not encryption but gives confidentiality.

Pre shared symmetric keys is assumed to exist between Alice and Bob so the MAC tags can be checked at the destination to verify what's chaff.

Charles adds chaff independently so that confidentiality is achieved but Law Enforcement can't obtain "keys" from Alice or Bob to break the confidentiality.

Note that the keys supply authentication (NOT confidentiality) as is the normal purpose for the MAC.

Read more at Rivest's homepage