An altar cloth is predominantly there to protect the altar itself from any damage that might occur through the objects placed on it. Its secondary function is to increase the power or intention of any magical workings.
Depending on what kind of altar cloth the practitioner chooses, certain ideas or powers might be boosted or called upon with the altar cloth. For example: You might want to petition the Triple Goddess to help you with something, in which case you might choose an altar cloth with the symbol of the Goddess on it so you are invoking her and representing her on your altar.