sam, the way it was explained to me is that it allows the dog to gain balance and learn to move the stock, and begin to learn to stand, and change direction, with little or no correction from the handler or instructor. Most dogs change direction as you change the direction of the stock in the inner round pen.
It helps teach the dog some basic control commands before they are released on the stock.
We went in the afternoon to a square pen where she was worked on a line with some broke sheep.