I've been trying to figure out exactly what way this function affects Barbarian spawn rate.
I did some tests. I began two games using the same startup variables, except for the BarbPercent value which I tested at both 1 and 900. For the purposes of scouting I modified the training time so that I could produce one unit per turn. I was playing on a Standard map with city-states disabled and only one AI; I don't know if this adversely affected anything but I figured other civilizations spawning in random proximity might affect the numbers.
In the game where the value was set to 1, I found six barbarian camps in the first ten turns. When I set it to 900, I found five. Obviously this isn't an exact science but I'm even more confused than I was before. I also did testing with it at 300, 500, and 700 just to satisfy my curiosity but have nothing to show for it.
I noticed the default number increases as you chose longer game speeds. I'm not sure if this is to make barbarians spawn less to compensate for being able to build less military units per turn, or make them spawn more to give you more micro-managing to do since you have more turns with which to use your units.
I never really bothered to do any modding in Civ IV so I don't have any prior experience with this variable. I'm assuming you're right in that decreasing the number makes them spawn less, I'm just trying to figure out exactly how it works.