For what it's worth, my dad always wore it inside his wrist, and always said it's so you don't fling your arm out and smash it on something. He'd also twist it around when doing close work. So he, at least, both believed it and did it.

The real reason: if you ask me the time when I'm holding a pint, I'll pour my drink on you, not me (this was the punchline in an old British comedy sketch I can't find a reference to now).