This flag is usually set on /tmp, where all users can create files. Note that /tmp must have o+rwx set in order for all users to be able to create, view, modify and delete files. By the same token, users can also delete and rename the files owned by another user (because the containing directory is marked as o+w).
The t flag makes sure that users can only remove and delete their own files.
Note that this flag does not enforce any privacy. If a file is marked o+r, then it is still readable to all users, even though users other than the user owner cannot delete it.