The pad is typically added to reduce discomfort when doing back squats i.e. it reduces the pressure on the back from the steel barbell. Other designs have a curved indent in the middle to further reduce the direct application of pressure to the spine.
<a href="//commons.wikimedia.org/wiki/User:RickyBennison" title="User:RickyBennison">RickyBennison</a>
<span class="int-own-work" lang="en">Own work</span>