First, let me say that I'm not a lawyer. I have, however, purchased a lot of software as a contractor for various branches of the US government.
My understanding is that the paragraph re-states the law saying that the government is granted a license to use the software but does not own the software (and therefore it's source code, etc.) This is important because products owned by the US government are technically public property and are subject to certain rights of inspection by the public. This defines the 'ownership' as that of a license to use, which can be inspected, but not of the software, which cannot then be reverse engineered, and limiting the public's rights to review the source code. The paragraph is boilerplate, and protects the software developer. It does not restrict the usage by the government employee, but shields the product from inappropriate public inspection.
This coverage is being tested lately by a spate of people who are getting ticketed by speed cameras and alcohol breath analyzers. Because the government does not own the software in these devices (only the license to use it), people are claiming they have no right to inspect the 'workings' of these devices, and cannot verify the validity of the charge. The companies themselves refuse to turn over the source code to the devices at the request of the defendants (naturally), and the defendants claim they are unable to mount an adaquate defense. Case dismissed.
My guess is that, for devices that will have a public-facing component, the government will require of vendors some appropriate level of certification or third party escrow-type testing, in which the device's accuracy can be certified by the courts without the public having direct contact with the source code. This is a decade away, and a lot of drunks are going to go back on the streets in the meantime.
For your own purposes, the statement is helpful, and I recommend including it in your own EULA for government purchases in the US, including states and municipalities.
(To learn more about the Breathalyzer cases, see here http://www.techdirt.com/articles/20051020/107211_F.shtml )