When you work with a biped, Rubber-Band mode provides a way to proportion the arm and leg links simultaneously, by moving the link with the Move transform, instead of using scale. Rubber-Band mode scales both the link and its child in a single step.
This is particularly useful when fitting a biped to a skin prior to applying the Physique modifier. For example, rubber-banding the upper arm rescales the upper and lower arm objects and moves the elbow link without affecting the position of the shoulder or the wrist. If you've spent a lot of time getting the fingers in the right place, you can reposition the elbow by rubber-banding, without affecting the hands.