Simply put (per stated above) it'll help you hit smaller targets for more damage so you compare missile explosion radius with target signature radius. Thing is that apart from that obvious bit it's one of the most important variables in the whole missile damage calculation and weighs in much more than explosion velocity for instance. So unless you're fighting targets that are "bigger" than your missiles rigor rigs will increase your applied dps, moreso than one might realise.

This still vastly understates the benefit of lowering the missiles explosion radius.

Missile damage is affected by two factors:

1) target_sig_radius divided by missile explosion radius or 1, whichever is smaller: A missile will never deal more than this number * 100% of its paper damage, regardless of the targets velocity. This is why it's fairly pointless to shoot frigates with torpedoes, while shooting frigates with 1400mms will pop them if their transversal is low enough.

2) (target_sig_radius*missile_explosion_velocity) / (missile_explosion_radius*target_velocity) (the larger this number, the more damage your missile will do)

This part of the formula is why decreasing your missiles explosion radius by 10% more beneficial than increasing your missiles explosion velocity by 10%. The former increases the above number by 1/(0.9), or about 11%, while the latter increases the above number by 10%.

So even when you're shooting targets with a sig radius larger than your missiles explosion radius, reducing the explosion radius by 10% gives more benefit than increasing explosion velocity by 10%.