Seeds need to be covered to protect them from birds. Straw also provides light shading from the sun and will keep the soil moist while the grass takes root. Watering will weigh down the straw to help keep it in place.
Straw is a cheap cover for large areas and there is no smell, unlike with manure, which is sometimes used.
Grass will grow up through the straw. When the grass is ready for its first mowing, a lawnmower can easily turn the straw to mulch or pick up the straw with the grass cuttings.