Aurora has its roots in Starfire, which has the concept of a SpaceMaster to manage the fog-of-war issues and run the game (which are often called campaigns). This is analogous to the role of Dungeon Master in D&D. A search of my recent posts for "Aurora Starfire" will probably bring up a longer discussion of this. The original code for Aurora was a program called Starfire Assistant, which helped the SM and players with bookkeeping.
Since the SM is the one who manages the game, he needs capabilities to edit the state of the game and see the state of all players. SM mode lets the SM do this. It's password protected so that the SM could send the DB to players for order entry without fear of them "peeking" at other players.
Since most Aurora games are solitaire, the user is essentially wearing two hats: an SM hat who sets up the game, and a player hat who plays it. SM mode lets the user keep track of which hat he's wearing - when he's in player mode, he can stay out of SM mode and not be worried about accidentally violating the laws of (game) reality
So when you see people talking about assigning tech in SM mode, what they're (typically) really doing is deciding on the initial start for the game they're setting up - it's like making the dungeon and/or telling people at what levels their characters start. I personally like to do conventional starts, because I've discovered that the resulting empire has a different feel after 10 years than a high-tech start would. Others like to go with an ultra-high-tech start. If you look at Steve's campaign writeups (and Kurt's as well), you'll see that they tend to have a wide variety of initial start scenarios - it's kind of like running an experiment to see what will happen.
There's one other way in which SM mode is used - to work around "features" (or bugs) in the game, or to implement house rules. Aurora is less polished than a commercial product, so sometimes it's easier to use SM to dodge around a bothersome feature of the game. I think it's fair to say, however, that most players don't use SM to "cheat" while they've got their player hats on; instead they use it to shape Aurora into the game they want to play.
John