Mixing valves operate similar to a single handle shower valve - They allow both hot and cold water to enter the valve and "mixes" them to create "tempered water" - or, water that isn't AS HOT as the water coming out of the heater.
Why is this important?
Suppose you enjoy using hot water for cleaning your dishes and laundry. You have your water heater set at 140 degrees F. It helps keep your dishes clean, your laundry clean, and you like a tad hotter shower than most. (It also prevents the growth of Legionella. Just saying...)
But suppose you have children or guests staying with you - and they aren't used to the hot water or maybe you're afraid they could scald themselves if they're not careful.
That's where a mixing valve is VITAL!
Most water heater manufacturers recommend mixing valves at the outlet of the heater to help temper the water and keep if from scalding. (Some even recommend mixing valves at EACH fixture.) And, in the (surprisingly common) event the water in the water heater is well above scalding temperatures, a mixing valve may be the best protection against harm.
But, What Happens if the Valve Fails?
When a mixing valve fails, it fails in the OPEN position, meaning it will allow more cold water into the system than was predetermined by the homeowner. Basically, you'll know your mixing valve is bad when your shower is cold, but the water heater is working just fine.
So, it's handy having an extra safety precaution that can keep your water hot, but not so hot as to burn or scald you or your loved ones.