Lime is used as a binder in mortars usually in the form of Hydraulic lime. Pupose of Lime used in modern cement based mortars is mainly for its properties as a plasticiser.
Lime helps with the closing up of hairline cracks that can develop in brickwork or plaster. By absorbing carbon dioxide from the atmosphere, the lime in the mortar or plaster can fill these cracks. A weather tight, strong wall is what you’re after. Without lime the mortar or plaster is more porous.