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German handheld anti-tank weapons, Panzerfaust and Panzerschreck, could destroy every tank of WWII era. Allied tank crews often covered their tanks with logs or sandbags to protect their vehicles, but it didn't help much against powerful HEAT warheads. Makeshift spaced armour, such as fitted to this T-34-85 however could indeed give better protection from these weapons by causing premature detonation of warheads.
ive heard it was mostly done for morale.
Well crew surely felt safer, but this actually worked. It was no different than Thoma-Schurzen of Panzer IV Ausf J that "stopped" Bazooka shells too.