noname=yes simply specifies that this object doesn’t actually have a name. This is used because a highway=residential with no name tag could either be a road with no name or a named road for which the name just hasn’t been added in OSM yet.

I guess a router could use noname=yes to treat unnamed roads similarly to named roads, but it seems odd (or a bug) to prefer named roads over unnamed roads. I can point to countless examples where an unnamed road is the most appropriate road to use while navigating through an area.