The only function of this layer is to act as a heat shield. Was the shield facing the car or down to the road? If it was facing the car or some component of the car, then it's function is to keep the component from overheating. If it's facing downward, it's function is to keep the exhaust system from igniting dried grass of leaf piles should you happen to park over them.
This problem is more prevalent with cars that use 409 stainless steel - the cheapest grade of stainless - for exhaust components. The premature failures are typically cracks at the welds. Some of the better manufacturers use 300-series stainless which is less prone to problems at the welds, but is still susceptible to fatigue.
95 E320 Cabriolet, 131K