I know it stops the enzymes from breaking down any more sugar, but is there any other point to it? Will I notice any difference in the final product if I just got straight to sparging? Also, if my mash passes the iodine test, wouldn't that say there's no more starches to break down anyway?
I think in the homebrew scale a mashout isn't always called for. Namely because the sparge to boil time is fairly quick. Compared to what may take much longer when brewing at the 7bbl or more level.
Mashing out will lock in the mash profile you have achieved during the mash. Despite a positive test with iodine, there can still be some complex sugar/starch molecules remaining that will continue to convert if allowed to. This may lead to thinner beer, or suffice it to say, maybe not the mouthfeel/body your initial mash process was gearing towards.
Lastly, I have found (along with some brewing friends) mashout does tend to increase efficiency a bit. I think this is due partly because the higher temp lowers viscosity which allows things to flow a bit better; hence extracting a little more sugar. Also if you are recirculating your mash with some more advanced equipment (like a pump) then mash out temps and the circulating wort will definitely increase efficiency.
Are these increases necessary and noticeable.... It depends on each brewers system and taste thresholds. Certainly it doesn't hurt to give it a try on some back to back brews and to some side by sides with the same recipe too.
As a batch sparger I don't normally go to mash out temps. But I am currently rebuilding my set up with a pump and I might get into doing it with the use of a direct fired mash setup.
First, the iodine test is unreliable and doesn't really tell you all that much. There can still be starches in there, or you might get a false reading, and it doesn't tell you anything about the fermentability of the wort you've produced. Second, although raising the temp might reduce viscosity, experiments with cold (room temp) sparging have show equal efficiency, so the reduced viscosity does not lead to higher efficiency. Raising the temp for a mashout does usually have the side effect of increasing efficiency by providing a longer mash time and a higher temp so that the alpha amylase will break down more starches into long chain dextrins. While this will increase efficiency, it can sometimes lead to less fermentability since the beta amylase that breaks those long chains down has already been denatured.
If you fly sparge, it might not be a bad idea to try a mashout to see if the fermentability of your wort lessens (assuming you've been having over attenuation issues). If you batch sparge, you get to a boil much sooner, which obviously will denature enzymes. In that case, a true mashout isn't needed.
There are so many variables in homebrewing it's really hard to nail down what is important and what isn't! However, after repeating the same recipe several times (English bitter) I have seen no noticeable effect on the final product if I mash-out (170F / 77C) or if I don't.
However, I batch sparge, so this is consistent with what the above commentators have said.