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Water is not compressible so the volume of air does the compressing and pushes the water out once a tap is opened. Also reduces the need for the pump to turn on everytime a tap is opened for a short time. Yup! Lets some air in and yup, block'em off! (don't forget the t-tape or pipe dope!)

Cobleskill's got it, air volume control for galvanized non-bladder type tank.