I once worked on a credit card authorization system. Basically, the additional code (3 digit on MC, Visa; 4 on AMEX) is used as part of a fraud detection program instituted by the major credit card companies. The theory is that this number is known only to the cardholder (it is not encoded on the magnetic strip). In return, companies that submit this, and additional fraud-detection info, receive a discount on the rate they pay for credit card processing.

In Priceline's case, I can't imagine they are the target of very much fraud, so they are essentially getting this discount for nothing.