When you’re sharpening a cutting edge, you are removing bits of metal. Coarser stones remove bigger bits and finer stones remove smaller bits. These bits of metal are called swarf. If you sharpen on a dry stone, the swarf can fill in the tiny spaces in the stone that do the actual grinding, making the stone less efficient. Also, on coarser stones or rougher edges, the resistance of the stone to the blade can cause uneven wear.
tl;dr: To carry away swarf and act as a lubricant for a smoother sharpening stroke.
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