The only real function that it serves is one of intimidation. If a police officer lies to a suspect and tells him that they have a witness who can place them on a particular street at a particular time, and the suspect then tries to explain what he was doing there, then the lie has extracted information. If a police officer tells a suspect that he flunked his polygraph, regardless or whether he did or not, then he might confess to something.Ah, but everything's a negative until it's tested. That some of those negatives which are false doesn't make the polygraphs ineffective. The polygraph is a terrible tool for determining truth telling. But it's still a powerful investigative tool, when used by a skilled examiner.
The catch is that in order for it to work they have to convince large portions of the population that this thing works, and inevitably some of the people they convince are law enforcement officers. These people start to use the polygraph not as an intimidation tactic, but as a way of determining if the suspect is telling the truth. Thus into the realms of madness they go...