What exactly does it do? The excerpt from this Compaq document explains it well:
Power interruptions, even for brief moments, result in the loss of data which was being written to or read from storage... Power interruptions can have terminal effects on data which is in the process of being written and is temporarily residing in cache. This data does not yet exist in the storage environment and has been offloaded from the server.
Therefore, loss of power to the cache means any data stored in the cache is lost forever.
If, however, the cache has a power source independent of the external IT environment, the data in the cache can be maintained for a short period of time, allowing the recovery of that data and the protection of the integrity of business critical information. Battery backing of cache serves this function of an independent, though temporary, power source. Battery-backed cache will normally retain the integrity of the data in the cache for a period of several days, depending on the capacity of the batteries at the time of the failure.
Is it just for RAID configurations? Anything doing write caching can have BBWC, RAID controllers and SAN's cover most of these.
If there is a power malfunction, isn't the data loss inevitable? It's more likely to occur if you have write caching enabled & no battery backup. It's a strong recommendation that if there's no battery backup that write caching is disabled.
Are there any performance improvements from it (assuming the server will mostly do sequential reads and sequential writes)? Write caching is there for performance, what it basically means is when writes are flushed to disk, the disk controller returns to the OS stating that the writes have been committed, when they're still actually in cache & can be written later on.
What affected your decision when you faced the option to buy one? It's a standard option for any professional RAID or SAN on the market, Write caching & battery backup go hand-in-hand & is a must, especially if your system is for a database. Write caching without battery backup is dangerous & an outage can leave a database in an un-recoverable state.