Insim is a simple method of communicating certain information between LFS and an external program.
The advantages are that you can run third party programs that interact with LFS. Such as preventing voting, or implementing track rotations. The entire STCC league runs via an InSim addon.
In order to make use of it you either need to make a program to use it, or use an existing program. There are a few existing ones, such as LFSlapper, luaLFS (still being developed), vRotator, etc. etc.
If you want to write your own, you might want to check out docs/InSim.txt, and the LFS Programmers sub forum.