i race flat track and everyone says i should get a sway bar kit or whatever. what does it actally do

 

A sway bar on a car or truck serves to dampen body sway and front wheel shimmy, primarily on turns or rough terrain in the case of 4x4's. For flat track I would think it would work the same. Running shocks with less or no sag plus extended A- arms, at least on the outer side of the machine, is normally the method used to accomplish this.
a sway bar is basically a small shock mounted horizontally, usually at the very front of the machine near the tie rods.