The insulation is rolled between the studs to fill, or partially fill the cavity. This slows down heat transfer between rooms and reduces the cavity through which soundwaves can travel. This application is common in all building types.
Insulating internal walls improves your ability to control heat transfer within a building. Although the heat may not be lost if it passes from one room to another, it may be passing into a room that is less often used and thus the energy is wasted.
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