Theoretically the spring provided an electrical connection from the wheel to the spindle to keep the static charge down that builds up when the tires are rolling down the road.
The grease within the bearings provides somewhat of an insulating barrier between wheel and spindle so that if charge buildup reached a certain point a spark would occur and you could hear a snap in your AM radio, not a problem with FM. Don't know how effective they really were but became less of a problem as people migrated to FM.
Kurt.