The ones on the leech of the sail can tell you if the sail is over-sheeted.

Ideally, you want the flow of air off the back of the sail going aft - the tell-tale streaming out behind the sail. That would indicate that the flow is attached (non-turbulent) over the entire sail surface. Attached flow = more power and less drag.

More often than not, though, flow separates from the aft edge of the sail, creating a vortex "bubble" of turbulent flow that causes the leech telltale to stream forward. Here's a diagram of a similar situation - just move the bubble aft and you can see how this "backward" flow works:



The telltales are put up high on the sail (3rd or 4th panel down) because that is the area that is most suceptible to over trimming with the main sheet.