Most of us use SM mode for the initial setup phase. If you want specific tech already researched, systems designed, warships already available and stationed at a specific place, specific colonies etc.
Sm mode is used for creating new player controlled empire or NPR empires, and you need SM mode to switch between which player controlled empire is active.
And finally even if you don't intend on a complex multi empire scenario you have initial research or fleet build points available which require the use of space master mode to utilize.
Then there is designer mode which steve restricts giving out the password for, which lets you look at or modify every npr, civilian , etc.
You can easily break the game changing that stuff, but it's a valuable tool if you have a long running campaign that gets broken by a bug which could be fixed with a little detective work and creative pruning.

Historical Perspective:  Aurora has its roots in an earlier game called Starfire, which was (is) a multi-player, refereed, interstellar war game.  The referee (or "spacemaster") was there to provide fog-of-war - the players gave him their orders, and he managed interaction between the players and the NPRs that they activated.  Think dungeon master in D&D.

Steve wrote a program called Starfire Assistant (SA) that helped SMs (and players) manage the (copious amounts of) book-keeping involved in a game of Starfire.  The players would pass the DB around, adding their orders for the upcoming turn (it was turn-based), then the SM would run the turn.  The SM was also the one responsible for placing the initial player empires.  SM mode was put in to allow the SM to adjust reality the way it needed to be, e.g. during setup or when the program didn't handle some book-keeping properly and required human intervention.  The Rigellian Diary is the campaign write-up of Steve's campaign that drove most of the development of SA.

Even during SA, a lot of people (e.g. Steve in the Rigellian Diary campaign) used it to play solo games, where they wore both the player and SM hats.  So the purpose of the SM password was two-fold: 1)  It kept players in multi-player campaigns from seeing/doing things they shouldn't and 2) in solo campaigns it helped the player to avoid doing things while wearing the player hat that should only be done under the SM hat.

When SA turned into Aurora, the multi-player aspect (mostly) went away.  SM mode stuck around, however, because players still need to act as their own SM and it's useful to have a distinct interface mode so that you can be aware when you're performing SM functions.

John

...And you can use it to tailor the universe to your liking as well.  A lot of people use it's tools to set up specific scenario games but it is also great for tweaking your game experience.  Not hard enough?  Add a few aggressive computer aliens.  All your surrounding systems barren of minerals and you like your current game and don't want to throw in the towel?  Use SM to make a resource rich system and create a previously "hidden" JP or just add a million minerals to yourself.

Based on what I've been able to glean from the forums, it is a tool which you can use to modify the universe to your liking to set up scenarios.  But I cannot figure out how it works.

Is it possible to play a normal game for ten years, for example, and then use spacemaster to look at the universe from the perspective of an NPR?  And is it possible to start playing the game as that NPR?