I have no knowledge of the technicalities of the system, but after a random sample of flights I would say it works as follows:

If your flight is from LHR the tag/barcode is used by the baggage handlers at the destination to identify the bags that should be loaded onto the claim belts first. But if your flight is to LHR it, er...., isn't.

Maybe my experience isn't typical but that's how it seems to me.