When other potential bidders look at the history (because an item on it's starting price with 4 bids on it is intriguing) they will see someone who has increased their bid multiple times. That can be interpreted a number of ways, but the intention is to make other bidders think you really really want that item, and have put in a really high final bid, thus dissuading them prom bidding.
Of course, if they put all those bids in at the same time, it's likely they simply added $1 or so to each bid, as when increasing your own max bid you don'y have to increase it by set amounts - as long as it's higher, it'll do.