Karl Shifflett just posted a comprehensive article on Sample Data in the Visual Studio 2010 WPF and Silverlight Designer.
Developers using a visual Designer use sample data to light up their UI at design-time; to cause the Designer to render like it will at run-time. This time saving feature is especially important when designing DataTemplates or adjusting the layout of a DataGrid since the developer will not have to actually run the application to see what it will render like with data.