It is intended for a new sort of barbarian, bandits. They are intended to upset trade mostly. Units will target caravans and trade routes but mostly will not move from the hideout. They wont build cities but will build hideouts and spawn there even if with in a nation's territory. Some crime and diplomat units may place a bandit hideout, usually in another's territory, using up the unit unless it has much exp in which case it will return to the capital, similar to a spy.
The spawn rate modifier is for spawning such bandits.
Diplomats and Missionaries may be able to sway the bandits showing them the error of their ways. This could have a number of different results, a new city; some captives, workers and soldiers; or they may just disapear
Profitable trade routes may spawn a number of bandit hideouts along their path. Each should reduce the amount of income from that trade route. A bandit hideout on a trade route in the wilds and "far" from any nation may become a "Bandit City State" which charges a toll to protect trade from other bandits and eventually become a neutral "City State" in a similar way to barbarians becoming nations.