No matter how big or how small the entire temple is, the main Garbha Gudi (the mail sanctum) will be a small one which will open narrow to one side. Hence at any point of time, there will be only a small number of people who can be occupied and a lot of other people will wait outside the sanctum and miss the line of vision. During some particular times like any important pujas, or haarthi times, it gets difficult for a lot of people to have clear view of the puja or the haarthi.
Now, by placing mirrors facing the god, usually located above the exit door, a lot of people outside the sanctum, can still manage to get a good glimpse of the pujas, harathi etc.taking place inside. Hence, this mirror helps a good number of people view the puja/ harathi without causing a melee.
It has another small, yet an advantage. While leaving the temple or the main sanctum, people can manage to take another final glance before leaving the temple.