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The main function of populism is to allow the ideas of a certain set of the "common people" to be heard and to allow that group of people to feel as if they have a voice. This can be seen in many ways with the Tea Party movement today.
Populism is an ideology that stresses the virtue of the traditionally-minded "common people." It asserts that their instincts and values are superior to those of both the elites and the poor (particularly, at least in the US, non-white and immigrant poor).
Today in the US, we see this dynamic at work in the rise of the Tea Party. Members of this populist movement assert that their values (self-reliance, belief in small government, traditional social values) are what made the country great. They argue that elites (Obama, Bernanke, the bankers, liberals in general) and the poor are combining to destroy that greatness.
Populism functions, then, to give a voice to the "silent majority" of common people who see themselves as the backbone of the country.
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