Funnel in Google Analytics is a way of checking which part of ex. a registration process people drop out. If you have a three step process of buying an item, and you don't get any conversions - setup a funnel, and you might find out that it's the last step before buying where people leave. Maybe there is some problem with that page, and some small corrections might drastically improve sales !? AS far as SEO i'm not sure if it has any great value, but it's a great tool to use if used correctly
suppose if you have e-commerce application and you want to track why consumers are leaving your add to cart page of particular products then funnel helps you. you can identify the reasons why users are leaving payment processing page, probably the shipping cost, the button is not visible, perhaps the tracking code in not installed properly on last page and you are unable to track the data. in short it give you idea about users activity on wizard kind of pages. thanks!