I makes sure that the racer who's in last position gets a boost, so it can keep up with the leader (you). If you drive in last position, the leader races slower. So the the gap between all cars wont get to big.
It happends in about all arcade racing games and is annoying as hell. You may gather a massive lead, make one little mistake and just by doing that the opponent will be all over you when they were just about +10 seconds behind.