This is a penalty that allows a lender to charge you a percentage of your loan balance if you pay your mortgage debt before the term expires.
There are both advantages and disadvantages of accepting an existing loan or allowing someone to do so when you sell a home.
Timing is important to do this right. In a sense, it is a bet on both sides - the borrower bets that interest rates will rise after a certain point, and the lender bets that they will drop at some point.
In the simplest sense, a buydown is a way to buy a lower interest rate for a certain amount of time - and thus reduce monthly payments.
Not only are there interest rates to deal with, but there are other fees that affect your overall costs, and very few standards to regulate them. One of these things is the "point."