A. This is an internal look-up table used by lots of different bits of SQL Server. It is undocumented as it is for Microsoft internal use, but there were some good articles on it for SQL 6.5 and below in SQL Professional - www.pinpub.com. If you subscribe you can get back-issues, download articles etc.
It is used to look up the 'names' for status bit info, like when you say sp_dboption.. each bit in sysdatabases.status means something, but to translate the bit into English, the spt_values is used.
If you do sp_helptext on a few system stored-procedures you will see how it is used. e.g. sp_helpdb, sp_lock and sp_helprotect.