This allows for better expansion in the oven. As soon as the exterior dries, the loaf becomes encased in an inflexible shell and can no longer develop. You eventually do want the crust to form, but only after the loaf has expanded. Sprinkling with water allows some extra time for this expansion.
The extra moisture on the surface also helps the starch of the flour to gelatinize, which improves both the texture and the color of the surface