Generically -- die holders are to keep the alignment of a die straight while it is advanced to cut outside threads. One common machinist application is to put threads onto a short piece of metal where cutting threads with a lathe is not practical.
Most penturing dies are used to cut external threads in the feed/cap area of a pen being made without the benefit of pre-manufactured components.
Die holders are much more stable on a metal lathe or an adapted wood lathe than alternatives like a hand die holder and provide a more consistent outcome (and a much shorter learning curve). Much better with delicate fragile materials like acrylics unless you want to invest in a higher loss rate and more swearing.
Mike: I believe the thread you are referring to is in regards to a 1 1/2 in die holder. This is for a die some of us purchased on a group buy recently for kitless pens.