Thermal paste aids heat transference between the processor and cooling solution, whether a water block or heatsink for an air cooler. Air is not a great conductor of heat, which hampers the ability of the processor to cool down under load. Thermal paste helps alleviate this by filling out any gaps caused by manufacturing defects. It's usually already applied to the base of a CPU cooler allowing it to be installed immediately, but it's possible to install aftermarket thermal paste with better performance or when reseating the cooler.
